POLL-Thailand c.bank to remain tight on rates, pending resumption of hard-hit tourism


By Devayani Sathyan

BENGALURU, November 8 (Reuters)Thailand’s central bank is expected to keep interest rates at an all-time high of 0.50% until at least 2023, as the country’s tourism-dependent economy will struggle to find rapid growth despite the welcoming tourists without quarantine, a Reuters poll showed.

In an effort to revive an economy struggling to recover from the collapse of its vital tourism sector, the Southeast Asian nation has authorized the first vaccinated visitors without quarantine requirements in Bangkok on Monday.

But with only a fraction of foreign tourists expected this year from pre-COVID-19 levels, economic recovery from the pandemic crisis will be slow.

This, along with relatively low inflation, will provide the Bank of Thailand (BOT) with the space to keep monetary policy loose for longer in order to support growth.

Indeed, the 21 economists in a Reuters poll from November 1 to 5 were unanimous in predicting that the central bank would maintain its overnight repurchase rate. THCBIR = ECI at 0.50% at its meeting on November 10 and until the end of next year.

Out of a smaller sample of forecasters willing to look further, only two predicted a 25 basis point rate hike in the first quarter of 2023.

“Tourism is a big part of the economy and we don’t see how it can come back so quickly. Many of our target countries, especially China, still don’t allow people to travel abroad,” he said. said Phacharaphot Nuntramas, chief economist at Krung Thai. Bank, the second largest bank in the country.

“So locally, we think 2023 will be the year that tourism returns with a lot more force. Whether the BOT would increase in 2023 will depend on how fast it is.”

Thailand, one of the most popular tourist destinations in the Asia-Pacific region, had imposed strict entry restrictions that have been criticized in the travel industry for being too onerous and economically damaging.

Over 3 million jobs dependent on Thai tourism and around $ 50 billion in income per year have been lost.

With only nearly half of its population fully vaccinated, Southeast Asia’s second-largest economy is at risk of another wave of the COVID-19 pandemic. The Christmas and New Year holidays are fast approaching and festive gatherings and more tourists in the country could lead to an increase in the number of cases.

That, coupled with a significant economic slowdown in China, the country’s largest trading partner, means that the likelihood of a rate hike in the near future is low.

“We think the risk is low, and that’s because the BOT’s political priority at the moment is to support the economic recovery, which is weak, and we think it will stay weak even next year,” said Charnon Boonnuch, economist at Nomura.

The central bank expects inflation to stay near the lower end of its target range of 1% to 3%, which will give policymakers the ability to keep rates low for longer, unlike other central banks. Boonnuch said.

Rising energy prices and bottlenecks in the supply chain have led to soaring inflation around the world. Government measures to reduce the cost of living, in particular a subsidy on tuition fees and utility bills, as well as lower prices for some food items, have maintained inflation relatively tame so far.

Inflation reached 2.38% in October due to higher prices for oil and vegetables. A lower baht THB = currency, already down 10% this year, could push it up.[nB7N2P500E}[nB7N2P500E}[nB7N2P500E}[nB7N2P500E}

This will eventually cause the BOT to raise interest rates like its peers. MON / INTID / INTAU / INTECILT / IN

“The MPC is known to be relatively hawkish, given its concerns about the risk of financial stability and high levels of household debt,” said Lattakit Lapudomkarn, economist at Kiatnakin Phatra Securities.

“We think they will be more comfortable following the US Federal Reserve and normalizing the policy rate in the first half of 2023.”

(Report and poll by Devayani Sathyan; edited by Ross Finley and Steve Orlofsky)

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