Thailand Holds Rate As Downside Growth Risks Subside
Thailand’s central bank held its policy rate unchanged at 2.75 percent, as expected, saying downside risks to economic growth were starting to subside and inflationary pressures were in check.
In a surprisingly upbeat statement, the Bank of Thailand said the country’s positive growth momentum was continuing and the impact of slow global growth “has so far remained limited only to export-related sectors, which the greater-than-expected strength in domestic demand appeared to provide sufficient cushion against the adverse impact of export slowdown.”
The Thai central bank, which has cut rates twice this year for a total reduction of 50 basis points, said exports were projected to recover in the first half of 2013 on the back of an anticipated improvement in the global economy, with private consumption and investment continuing to drive the economy.
“The MPC viewed that as downside risks to growth subsided with inflationary pressures in check, the current policy rate remained accommodative and conducive to growth,” the bank said after a meeting of its Monetary Policy Committee.
The global outlook showed signs of stabilization on the back of better-than-expected U.S. and China data, although the fiscal cliff remained a risk factor, the bank said.
China’s economy appeared to regain traction and even the outlook for the euro zone economy is forecast to stabilize next year as the resolution to the debt crises becomes more concrete.
”Against this backdrop, the outlook of Asian economies has gradually improved with signs of recovery in exports, recent pick-up in China’s economy, as well as buoyant domestic demand,” the central bank said.
Thailand’s Gross Domestic Product grew by 1.2 percent in the third quarter, down from a quarterly rate of 2.8 percent in the second, for an annual growth of 3.0 percent, down from 4.4 percent.
Headline inflation in October eased to 3.3 percent, slightly down from 3.4 percent in September, while core inflation was 1.83 percent. The central bank targets core inflation of 0.5 to 3.0 percent.
The MPC’s statement was considerably more upbeat than last month when the bank surprised markets by cutting its rate by 25 basis points and described the global economy as “weak and fragile.”
The Thai central bank has forecast economic growth of 5.7 percent this year and 5.0 percent in 2013.