Thailand
Thailand: BoT hikes 2017 growth forecasts, holds key rate
The Bank of Thailand raised its forecasts for 2017 economic growth and exports while leaving the key interest rate where it has been for nearly two years.
As expected, the Monetary Policy Committee (MPC) on Wednesday voted unanimously to keep the one-day repurchase rate at 1.5%, where it has been since April 2015, a quarter-point above the record low.
The central bank is counting on government spending to support economic growth, which has lagged regional peers, as Southeast Asia’s second-largest economy faces global uncertainties as well as risks at home from household debt.
Thailand’s military government has ramped up investment and planned an extra budget of 190 billion baht for the fiscal year ending Sept 30.
“The overall growth outlook improved on the back of a clearer recovery in merchandise exports. Meanwhile, tourism continued to recover, and public expenditure remained an important growth driver,” the MPC said in a statement.
“Nonetheless, the Thai economy still faced many risks, particularly on the external front,” it said.
The committee said monetary conditions remained “accommodative” and conducive to growth, with ample liquidity in the financial system and low real interest rates. But it noted the baht’s appreciation — it has gained 3.7% against the dollar this year — might not be as “beneficial” to the export-dependent economy as it could be.
Small fund outflows
The baht has strengthened more than other Southeast Asian currencies because of Thailand’s lower external risks and smaller foreign fund outflows, BoT Assistant Governor Jaturong Jantarangs told a news conference.
All 24 economists polled by Reuters had forecast no policy change on Wednesday, and most of those giving a year-end forecast saw the BoT maintaining a hold through 2017.
“We doubt the BoT will be in any hurry to adjust rates soon,” Krystal Tan, Asia economist of Capital Economics wrote.
“For a start, the government has announced plans to raise spending and the BoT will likely be content to let fiscal policy take the lead in boosting growth.”
The BoT raised its 2017 GDP growth forecast to 3.4% from the 3.2% projected in December. It predicted growth of 3.6% in 2018.
The economy expanded 3.2% last year.
The central bank now expects exports to increase 2.2% this year, rather than be flat. For next year, it predicts a 2% rise.
Exports, a main growth driver, rose 2.5% in January-February from a year earlier after posting the first rise in four years during 2016, according to customs data.
Tourism — a rare bright spot that accounts for about 10% of GDP — is recovering from a slump following the death of King Bhumibol Adulyadej in October and a crackdown on cheap tours for Chinese visitors.
The BoT predicts a record 34.5 million tourist arrivals this year.
The central bank trimmed its 2017 forecast for headline inflation to 1.2% from 1.5%, well inside its 1-4% target range.
Kobsidthi Silpachai, head of capital markets research of Kasikornbank, said the eased forecast indicates “a lack of urgency should the Federal Reserve continue to move US rates higher”.
Source: http://www.bangkokpost.com/business/news/1223331/bot-hikes-2017-growth-forecasts-holds-key-rate