Thailand holds rate as outlook for growth improves

    Thailand’s central bank left its policy rate at 1.50 percent, as widely expected, but was slightly more optimistic about the outlook for economic growth as exports continue to recover and improved farm income and consumer confidence bolsters private consumption.
     The Bank of Thailand (BOT), which has maintained its rate since April 2015, added that inflation has been softer than expected but is still expected to rise in the second half of the year.
     ”The Committee assessed that the Thai economy’s growth outlook improved further despite facing risks especially on the external front,” the BOT said, a more optimistic tone than in its previous policy statement from March when it said the economy “continued to gain traction,” but there were considerable uncertainties related to the global economy.
      But unlike its March statement, when the BOT said the a recent appreciation of the Thai baht “might not be as beneficial to the economy as it could,” today it merely observed that the exchange rate in the recent period was in line with regional currencies.
     The baht fell sharply from the “taper tantrum” of April 2013 to September 2015 but since then it has been slowly appreciating, especially this year.
    The bath was trading at 34.36 to the U.S. dollar today, up 4.2 percent this year. 
     Thailand’s economy expanded by 1.3 percent in the first quarter of this year from the previous quarter for the fastest pace since the fourth quarter of 2012, boosted by consumption and exports.
     On an annual basis, Gross Domestic Product was up 3.3 percent, up from 3.0 percent in the fourth quarter of last year, as tourism also continued to recover, as expected. Public spending continues to remain an important driver of economic activity.
     The government’s planning agency has raised its outlook for export growth this year to 3.6 percent from a previous 2.9 percent and narrowed its overall 2017 growth forecast to 3.3 – 3.8 percent from 3.0 – 4.0 percent. Thailand grew 3.2 percent in 2016.
     Inflation, however, remains far below the BOT’s target range of 1- 4 percent, around a midpoint target of 2.5 percent, with little sign of demand-pull pressure.
     Thailand’s headline inflation rate eased to 0.38 percent in April from 0.76 percent in March due to lower fresh food prices as agricultural output has risen compared with last year’s drought.
      In March the BOT lowered its forecast for 2017 inflation to 1.2 percent from 1.5 percent.

     The Bank of Thailand issued the following statement: