Thailand Holds Key Rate as Economic Growth Forecasts Raised

Updated on
  • All 21 economists predicted the decision to keep rate at 1.5%
  • Central bank raised GDP growth forecasts for 2017 and 2018

Thailand’s central bank kept its benchmark interest rate unchanged near a record low in the face of subdued inflation, and raised economic growth forecasts for this year and next.

Monetary policy committee members voted unanimously to keep the one-day bond repurchase rate at 1.5 percent, where it’s been since 2015, according to a Bank of Thailand statement on its website on Wednesday. All 21 economists surveyed by Bloomberg predicted the decision.

Thailand’s economy is catching up with the economic boom in Southeast Asia, buoyed by a global trade recovery and supported by a flood of tourists from China. That’s being underpinned by an ambitious infrastructure spending plan, including on mass transit lines in Bangkok and a high-speed railway project with China, which the World Bank said will lead to expansionary fiscal policy well into 2022.

The government is hoping for a pick up in investment and consumer spending to broaden the expansion in Southeast Asia’s second-largest economy, which remains export-reliant. Growth has strengthened this year despite a 9 percent appreciation in the baht against the dollar, among the best performers in Asia.

Click to read: Thailand Sees Strong Growth Next Year as GDP Beats Forecasts

The Bank of Thailand has fought off calls to ease monetary policy this year despite inflation remaining below the central bank’s target band of 1 percent to 4 percent. Economists at JPMorgan Chase & Co. and Standard Chartered Plc predict policy makers will follow global central banks and raise interest rates next year.

“We’re not expecting BOT to follow the Fed in the immediate future,” said Edward Teather, a Singapore-based senior economist at UBS Group AG. “They have trouble raising interest rates with inflation below target and the baht pretty strong. We’ll need inflation to creep higher and the baht strength to come off a bit, and we might see that more visibly in the second half of next year.”

These are the new central bank economic forecasts given in a statement in Bangkok.

GDP Growth20172018
New forecast3.9%3.9%
Sept. forecast3.8%3.8%
New forecast0.7%1.1%
Sept. forecast0.6%1.2%

— With assistance by Sunil Jagtiani, Yumi Teso, Anuchit Nguyen, and Ditas B Lopez

(Updates with growth and inflation forecasts for this year and next.)
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