Thailand: Central bank upbeat on long-term growth

The Bank of Thailand expects the economy to continue to align with potential growth projections for the next two years, then strengthen in the longer term.

For 2022, 2023 and 2024, economic growth is estimated to be 3.2%, 3.7% and 3.9%, respectively, in accordance with potential growth output of 3-4%.

For the longer term, the potential growth of the economy should be higher than this level, assistant governor for the monetary policy group Piti Disyatat said at an analysts’ meeting on Monday.

Thai economic growth potential has been declining for the past several years, mainly as a result of a changing labour structure, an ageing population and low private investment. Given these limitations, the country needs new growth engines to support economic potential, he said.

Mr Piti said while the country’s economic recovery should stay on track according to the central bank’s assessment, external factors will throw up key challenges for the economy next year, particularly a projected global economic slowdown.

The central bank assesses the US economic growth rate at 1.7% this year, falling to 0.4-0.5% next year. However, it does not forecast a recession for key global economies.

A global economic slowdown in 2023 would be the result of the tight monetary policy of key central banks.

According to the US Federal Reserve’s dot plot, the Fed is expected to maintain its policy rate at a high level through the first half of next year.

The Bank of Thailand’s Monetary Policy Committee (MPC) is expected to maintain its policy normalisation by increasing its benchmark rate gradually, Mr Piti said.

The MPC will monitor the country’s economic rebound, inflation rate and financial system stability to ensure a smooth economic recovery, he said. In addition, the committee will consider any impact on the economy from the tight monetary policy of key central banks.

“The Bank of Thailand does not set a terminal rate hike, unlike the Fed, but the MPC plans to monitor all indicators to ensure a smooth takeoff of the Thai economy,” said Mr Piti.

This year has been the most challenging one for Thailand’s economy in the past 30 years, with several risks and uncertainties continuing from the beginning of the year, he said.

Thai economic growth is mainly attributed to the tourism sector’s rebound, said Mr Piti.

As of Dec 10, the number of foreign arrivals tallied 9.5 million. The central bank is confident the figure will meet its projection of 10.5 million in 2022. The bank predicts foreign arrivals of 22 million and 31.5 million in 2023 and 2024, respectively, without many Chinese travellers, assuming China’s reopening will take place in late 2023.