Citibank Thailand still expects the policy interest rate to be gradually adjusted to 2.25% by the third quarter of 2023, most recently after the Bank of Thailand (BOT) announced an increase in the policy rate to 1.50%, in line with with the market and Citi expected as a result of the general picture of the Thai economy which continues to recover and concerns about the global economy of the Bank of Thailand (BOT), as well as the outlook for the tourism sector which has improved after the opening of China. Including the risk alongside inflationary pressures from the demand side which could also increase
Ms. Nalin Chatchotham, economist, Citibank Thailand, “Citi still expects the BOT to increase the policy rate to 2.25% in the third quarter of 2023 as Thailand’s economic growth momentum remains positive during 2023 -2024. Although the BOT remains concerned about household and SME debt, the BOT still believes that private credit can continue to grow. despite rising interest rates and finance costs Citibank expects headline inflation to average 2.2% next year, so the real policy interest rate will gradually rise from negative to 0%, which is similar to’ the historical average which could cause the BOT The increase in the policy rate is less than expected: 1) The global economy may slow down more than expected. And it can affect the Thai export sector and 2) If the baht appreciates too quickly, some MPCs may consider delaying the interest rate hike. “
Citibank sees that The recent appreciation of the baht is unlikely to be the main concern of the MPC at the moment, although the recent appreciation of the baht has raised concerns about possible effects in some sectors, such as the exports that. Exchange rates are not one of the main goals of monetary policy. which includes sustainable growth in the economy price stability and stability in the financial system. The Bank of Thailand revealed during a press conference on January 25, 2023 that the movement of the baht is still at a level that matches the fundamentals of the economy and does not require special measures to take care of them
On January 25, 2023, the Monetary Policy Committee (MPC) decided unanimously to raise the policy rate by 0.25% per annum from 1.25% to 1.50% after assessing that the downside risk to global economic growth could diminish The latest economic data from developed countries came out better than expected. And the opening of China faster than expected, and the Bank of Thailand (BOT) has predicted that the global economy will pass the lowest point this year. The content of the export sector will begin to recover in 2024, although Thai exports at the end of the year will grow lower than expected. In 2023, this will increase to 34 million from 31.5 million originally expected. the BOT is of the opinion that the recovery of the tourism sector will lead to employment as well as an increase in the incomes of the services sector and the wider self-employed
Meanwhile, the Bank of Thailand’s view on domestic inflation has not changed much since the November meeting, noting that the drop in global commodity prices has eased supply-side inflation pressures in Thailand. Ready to see medium-term inflation expectations for private companies still anchored at 1-3% of the monetary policy target, but the BOT still sees core inflation remaining above in the past. and the BOT noted that The latest inflation indicators show that inflationary pressures remain high. And care still needs to be taken to pass on the unfinished production costs to the prices of consumer goods in the future. Especially from electricity prices that have been adjusted earlier in 2023, as well as the growing recovery of the tourism sector may be another factor that causes higher inflationary pressure due to demand factors.
