Despite poor growth and signs of lowering inflation, the Bank of Thailand (BOT) is likely to hike interest rates by a quarter-point on Wednesday (30 November) for the third time in a row.
The widely anticipated 25 basis point increase in the benchmark one-day repurchase rate would bring it to a modest 1.25%.
Thailand’s economy is not projected to recover to pre-pandemic levels until early next year, when the country’s key tourist industry, which accounts for roughly 12% of total GDP, begins to gradually recover.
With inflation at its lowest in six months in October, aided by government steps to reduce the cost of living, BOT Governor Sethaput Suthiwartnarueput stated it is not essential to aggressively raise rates to contain inflation as in other nations.
The Federal Reserve of the United States has raised interest rates by 375 basis points so far this cycle, with 75 basis point increases at the previous four meetings and another 50 expected in December.
Despite the vast interest rate differential, the baht has been one of the best performing developing market currencies this year, falling just roughly 7%.
The recent decline in the value of the dollar has also reduced external pressure on the BOT to be more forceful with rate rises. Meanwhile, capital inflows have returned to the country’s domestic bond and equities markets this month, and the fall in foreign exchange reserves has begun to reverse.
A weak currency is typically regarded as beneficial to Thailand’s tourism-dependent economy.
The administration expects tourism to regain 80% of pre-pandemic levels by next year. In 2019, 40 million visitors visited Thailand.
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