BANGKOK – Thailand’s central bank raised its key interest rate by 25 basis points on Wednesday for a fourth straight meeting as it seeks to combat high inflation, even as the return of Chinese tourists brightens the country’s economic growth outlook.
The Bank of Thailand’s (BOT) monetary policy committee voted unanimously to raise the overnight repo rate to 1.50% in its first review of the year.
Of 23 economists polled by Reuters, 21 expected a quarter-point increase while the remaining two predicted no change.
Thailand’s economy is expected to continue growing while headline inflation should decline, the central bank said in a statement.
Any further rate hikes would be gradual and measured, he said, but added that it stood ready to adjust them as needed.
“The committee believes that a continued gradual policy normalization is an appropriate course for monetary policy consistent with the growth and inflation outlook,” the BOT said.
But it added it expected “increased risks of demand-side inflationary pressures due to the economic recovery.”
Exports were also expected to slow this year before picking up in 2024, along with a global recovery, it said.
With Wednesday’s move, the central bank raised the benchmark rate by a total of 100 basis points (bps) since August.
However, the tightening cycle has been less aggressive than many of its regional counterparts, as Thailand’s economic recovery has lagged behind that of other Southeast Asian countries. Its important tourism sector only started to recover late last year.
Average headline inflation hit a 24-year high of 6.08% last year, well above the BOT’s target band of 1% to 3%.
In November, the BOT predicted that Southeast Asia’s second largest economy would grow by 3.7% in 2023, after estimated growth of 3.2% last year, and that inflation would fall to 3%. Official 2022 gross domestic product (GDP) data is available next month.
The BOT also upgraded its tourism forecasts on Wednesday, saying it expected foreign arrivals to reach 25.5 million this year and 34 million next year, up from previous forecasts of 22 million and 31.5 million respectively. Thailand received a record of nearly 40 million visitors in pre-pandemic 2019.
China’s reopening is expected to further boost Thailand’s tourism, with the government predicting at least five million Chinese visitors this year, about half the 2019 figure.
The baht currency was largely unchanged at 32.77 against the dollar after the policy announcement. It has appreciated 5.3% so far this year, becoming Asia’s best-performing currency, driven by a weaker dollar and China’s earlier-than-expected reopening. (Reporting by Orathai Sriring, Kitiphong Thaichareon, Satawasin Staporncharnchai and Chayut Setboonsarng; Editing by Kanupyiya Kapoor, Martin Petty and Kim Coghill)