Adjusted Inflation Projections
The Bank of Thailand revised its inflation projections, forecasting a headline inflation rate of 1.3% for this year, down from the earlier estimate of 1.6%. Similarly, the projected inflation rate for 2024 was adjusted to 2.0% from the previous estimate of 2.6%. These projections do not consider the impact of digital wallet spending. The Bank of Thailand’s target for headline inflation is within the range of 1% to 3%.
November Inflation Figures
The headline consumer price index (CPI) experienced a decline of 0.44% in November. However, core CPI rose by 0.58% during the same month. Data from the Bank of Thailand revealed that if it were not for government subsidies, the headline inflation rates for October and November would have been +0.9% and +0.7%, respectively.
Economic Outlook
Despite Thailand’s ongoing economic recovery, there exist structural obstacles that could impede the positive impact of the global economy on the country’s exports. The Bank of Thailand’s monetary policy meeting held on November 29, disclosed that credit quality must be monitored. The bank also commented on tightened financial conditions and revealed its scrutiny of the credit quality of small businesses and households.
Monetary Policy Decision
The Bank of Thailand’s monetary policy committee unanimously resolved to maintain the one-day repurchase interest rate at 2.50%, the highest level in a decade. This decision comes after a 200 basis point increase since August of the previous year aimed at curtailing inflation. While the committee deemed the current policy rate appropriate for long-term growth, it acknowledged the need for immediate economic stimulation. This includes prioritizing infrastructure investment and labor upskilling programs, as affirmed in the minutes of the meeting.
Economic Slowdown
Thailand’s economy, the second-largest in Southeast Asia, grew at a slower rate of 1.5% in the July-September quarter compared to the same quarter the previous year. The weak performance is attributed to faltering exports and reduced government spending. Prime Minister Srettha Thavisin has described the situation as a “crisis”.
The Bank of Thailand is scheduled to review policy rates on February 7th. Most economists anticipate no changes to the current policy.