BOT awaits tourism revival, holds rates for another year

BANGKOK: The Bank of Thailand (BOT)will wait for at least a year before raising interest rates from record lows to support the Thai economy, which was hit hard by COVID-related travel restrictions, reports state news agency NNT.

Economic growth in the Southeast Asian nation has yet to return to pre-pandemic levels and the recovery continues to be fragile due to an outbreak of the Omicron coronavirus variant that crippled the crucial tourism industry, said the report.

Although inflation breached the BOT’s target range of 1-3% in January, it was expected to fall back within that range in the coming months, giving the central bank the space to maintain an accommodative stance as long as necessary to revive growth.

That comes despite multi-decade highs for inflation in many countries, including the United States, where the Federal Reserve is due to raise interest rates next month.

Past Fed tightening cycles have led to capital outflows from less developed economies, but analysts are not as concerned this time around.

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All 23 economists in a Feb 1-4 Reuters poll unanimously predicted that the BOT will hold its one-day repurchase rate at a historic low of 0.5% at its February 9 meeting and the rest of the year.

The central bank was expected to raise its key interest rate to 0.75% in the second quarter of 2023, followed by another 25 basis points in the December quarter of next year.

Another Reuters survey of economists published last month showed inflation was expected to average 1.5% this year and slip to 1.2% in 2023. Thailand’s economy was expected to grow 3.9% this year and 4.1% in 2023.

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