BANGKOK, March 15 — The momentum of Thailand's economic growth has exceeded expectations and its recovery has become more broad-based, but monetary policy needs to remain accommodative, the central bank governor said yesterday.
Veerathai Santiprabhob told Reuters in an interview that benign inflation is allowing Thailand to keep interest rates near record lows despite a rising trend in global rates.
The most recent central bank growth forecast, made in December, was for 3.9 per cent in 2018, the same pace as achieved in 2017.
The governor declined to give an updated forecast — the central bank will give a new one on March 28 — though his comments indicate there may be an upgrade. Thailand's Finance Ministry has forecast 4.2 per cent.
“The momentum since we announced the last forecast has exceeded our expectations,” Veerathai said. He said a rise in import numbers was more exciting than rising exports because it pointed to new private capital investment.
But he said that in looking at its forecasts, the central bank would also have to take global risks into account.
Despite a global trend of rising interest rates led by the US Federal Reserve, he said Thailand needed to focus on its economic recovery.
“Even though it has become more broad-based, I think it needs to be supported by accommodative monetary policy. There is not much inflationary pressures now in Thailand,” he said.
The Bank of Thailand (BOT) has left its policy interest rate unchanged at 1.50 per cent, near record lows, since April 2015, as South-east Asia's second-largest economy has struggled to gain traction.
Most economists expect no policy change for the rest of 2018, while some predict rate hikes in the second half of the year. Annual headline inflation was just 0.42 percent in February. Veerathai said he expects it to move into the central bank's 1-4 per cent target range this year.
Although the baht is near four-year highs against the dollar and is Asia's second best performing currency this year after Japan's yen, Veerathai said that he believed it had moved in line with regional peers versus a weakening US dollar.
"We would be concerned if the currency movement is highly volatile" and also if the baht's movement "is not in line" with that of regional competitors, he said.
In 2017, the baht strengthened about 10 per cent against the dollar, and so far this year, it has gained about 4.5 per cent.
Veerathai said the central bank had only intervened in certain cases when faced by intense flows but had no policy of using exchange rates to gain a competitive advantage in trade.
He said Thailand believed in constructive dialogue over the possibility it could be added to a US Treasury list of currency manipulators — the last thing Thailand wants as it grapples with the strong baht.
Recent US tariffs on steel and aluminium should not have an impact on Thailand because its exports of the metals are so small, he said.
“We would be more concerned if the world is moving in a protectionist direction and certain countries retaliate against each other,” Veerathai said. — Reuters