Statement by the Bank of Thailand:
The Thai economy as a whole continued to gain further traction on account of continued improvements in exports of goods and services that were driven by stronger global economic growth. Private consumption continued to expand, especially spending on durable goods, and would be underpinned by government measures. Nevertheless, improvement in overall household purchasing power remained gradual partly due to structural issues in the labor market together with elevated household debt. Private investment picked up further with the improved economic outlook, and was projected to continue expanding with additional support from government projects. Meanwhile, public expenditure remained an important growth driver despite recent delays in disbursement for investmentspending. Nevertheless, Thailand’s growth outlook was still subject to risks that warranted close monitoring, namely uncertainties pertaining to US economic and foreign trade policies as well as geopolitical risks.
Headline inflation was projected to edge up at a gradual pace on the back of the recovery in domestic demand and the increase in oil prices since last year. However, demandpull inflationary pressures remained low. Meanwhile, structural changes also contributed to more persistent inflation than in the past.
Overall financial conditions remained accommodative and conducive to economic growth with ample liquidity in the financial system as well as low government bond yields and real interest rates. Such conditions allowed financing by the private sector to continue expanding, with recent improvements seen in credits extended to SMEs across business sectors and areas. On exchange rates, the baht experienced higher volatility in the recent period and its movements in the period ahead would likely remain volatile mainly due to uncertainties pertaining to monetary and fiscal policies in major advanced economies. Thus, the Committee would closely monitor exchange rate developments as well as impacts on the economy going forward.
Looking ahead, Thailand’s growth outlook improved further particularly on the back of external demand while the strength of the domestic demand recovery and inflation developments must be monitored. Hence, the Committee viewed that monetary policy should remain accommodative and would stand ready to utilize available policy tools to sustain economic growth while also ensuring financial stability.