The Bank of Thailand (BOT) is projected to keep its benchmark interest rate steady at 2.50% next week and throughout the remainder of the current year, as indicated by a Reuters survey of analysts who have revised their forecasts for a rate cut earlier by a quarter.
In September, inflation accelerated to 0.61% from 0.35% in August but stayed below the BOT’s target range of 1-3%. Nevertheless, the majority of analysts in the survey anticipate that inflation will re-enter the target range in the present quarter.
Although Thailand’s economic growth has been trailing behind its neighboring countries in Southeast Asia due to elevated household debt, an upturn is anticipated with the anticipated rise in tourist numbers and an uptick in government spending bolstered by the introduction of the government’s digital wallet initiative.
A significant consensus among economists, 24 out of 28, participating in the survey conducted from October 7 to 10, foresee the BOT maintaining its current benchmark one-day repurchase rate at 2.50% on October 16. While four analysts expect a 25 basis point reduction, such a move is being pursued by the government to reinvigorate the sluggish economy.
In a recent meeting, the central bank reiterated that the prevailing policy interest rate aligns with the economy’s progression towards its potential level. Around 60% of the 26 analysts providing year-end projections anticipate that interest rates will stay unchanged, with the remaining expecting a cut of 25 basis points or more.
The median projection suggests that the initial 25 basis point reduction could potentially take effect in the upcoming quarter, contrasting with the August survey where the first reduction was foreseen for the second quarter. This transformation in perspective follows the Thai baht hitting a 31-month peak on September 30, presenting challenges for exporters and tourism spending, alongside a surge in household debt to a historic high.
After recent deliberations between the government and the BOT over economic stimulus, both parties convened last week to express their apprehensions. They are scheduled to meet again this month to deliberate on the inflation target.
According to survey medians, Thailand’s economic growth is projected to average 2.5% for the current year and 2.9% in 2025, down from the forecasts of 2.6% and 3.2% predicted in July.
