The Bank of Thailand is expected to maintain its benchmark interest rate at 2.25% this Wednesday. Despite experiencing slower-than-anticipated economic growth in the final quarter of 2024, international uncertainties and potential trade issues with the United States constrain the immediate ability to lower rates.
Thailand’s GDP increased by 3.2% year-on-year in Q4, elevating 2024’s overall growth to 2.5% from the previous year’s 2.0%. Although the latest growth figures fell short of expectations, they represent the highest annual increase Thailand has seen in nine quarters, fueling optimism about achieving a 3% growth rate this year.
Key drivers such as tourism, consumer confidence, and robust public expenditure are anticipated to further bolster the Thai economy. Notably, tourism, a vital revenue generator for Thailand, is benefitting from a resurgence in Chinese visitor numbers.
Consumer sentiment reached an eight-month peak in January, driven by government stimulus initiatives. The industrial sentiment index also improved, reaching a 10-month high due to a boost from state-driven stimulus, as well as stronger exports and tourism.
Inflation edged up slightly to 1.32% annually in January from 1.23% in December. However, it remains within the central bank’s target range of 1% to 3%. The BOT’s governor has affirmed the current interest rate as suitable under present conditions.
In December, the central bank refrained from adjusting rates after a surprise cut in October. Given one of the region’s lowest policy rates, Thailand’s central bank faces constrained flexibility for additional monetary easing as a buffer against economic slowdowns.
Adding to this cautious stance, there’s no pressing need for a rate reduction, considering that the U.S. Federal Reserve is anticipated to hold its rates steady following January’s inflation surge.
