Thailand’s central bank has surprised analysts by raising its key interest rate for the eighth consecutive meeting. The Bank of Thailand’s monetary policy committee voted to increase the one-day repurchase rate by 25 basis points to 2.50%. This decision comes despite the country’s slowing economic growth, below-target inflation, and rising global uncertainties. Only six out of 27 economists had predicted the quarter-point hike, while the remaining 21 had forecast no change in policy.
In response to the sluggish economic conditions, the central bank has lowered its 2023 economic growth forecast to 2.8% from the previously projected 3.6%, but raised its 2024 growth outlook to 4.4% from 3.8%. The country’s second-largest economy posted a year-on-year growth of just 1.8% in the April-June quarter, falling short of expectations due to declining exports and reduced investments in the tourism sector.
Thailand’s new government, in an attempt to boost the economy, has introduced several policies including waiving visa requirements for Chinese visitors. However, the central bank has revised its foreign arrival forecasts down to 28.5 million for this year and 35 million for next year, compared to the previous estimates of 29 million and 35.5 million. Despite the rate hike, headline inflation for this year is expected to be 1.6%, lower than the earlier projection of 2.5%, while the forecast for 2024 has been raised to 2.6% from 2.4%.