Thai policy rate is right for now, Mideast war is a concern

© Reuters. Bank employees gather Thai baht notes at a Kasikornbank in Bangkok, Thailand, January 26, 2023. REUTERS/Athit Perawongmetha

BANGKOK (Reuters) -Thailand’s current policy rate is appropriate for the economy, but the central bank is ready to make “adjustments” if needed, the bank’s governor said as he warned of increased global risks and concerns over the Middle East conflict.

Sethaput Suthiwartnarueput told reporters on Saturday that Southeast Asia’s second’s largest economy is still expected to grow close to forecast of 2.8% this year although third-quarter growth might be softer than expected.

The central bank’s growth forecast of 4.4% for 2024 will be revised if there is any change in the government’s stimulus plan, he added. Last year the economy grew 2.6%.

Sethaput said the Bank of Thailand is concerned about the fallout from the conflict in the Middle East.

“A new factor that I’m quite wary about is Middle East problems as evaluating the impact of this risk is very difficult,” he said, but added that the current policy rate is appropriate.

“The rate is appropriate for this period… But if the situation changes significantly from our forecasts, our set framework, there will be adjustments.”

Last month, the Bank of Thailand’s monetary policy committee unexpectedly raised the key interest rate by a quarter point to 2.50%, the highest in a decade, saying growth and inflation are likely to pick up next year. It will next review policy on Nov. 29.

The rate has been raised by a total of 200 basis points since August last year to rein in elevated inflation.

The baht currency has been more volatile than its peers due to external factors and capital outflows from the country, the governor said.

The baht has fallen about 4.4% against the dollar so far this year, with capital outflows at 308 billion baht ($8.53 billion) since the start of the year.

($1=36.11 baht)

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