InfoQuest (March 19, 2019) -- Thanawat Phonvichai, director of the Center for Economic and Business Forecasting at University of the Thai Chamber of Commerce (UTCC), predicted that Monetary Policy Committee (MPC) is likely to adopt the resolution of pegging the policy interest rate at current 1.75 percent at the regular meeting to be held on March 20, with the following rationale:
First, The inflation rate stands at less than 1 percent currently, still below this year's goal of 1-4 percent, making it unnecessary for MPC to raise interest rates to curb inflation.
Second, MPC will not pass a resolution to drive interest rates higher at regular meetings unless there are possibilities of a remarkable rise in global interest rates, as in the case of December 2018, yet this year global levels see no indications of uptick so far.
Third, Thailand faces an anticipated growth rate of only 3.5 percent for the first half of this year, as investors are waiting for more certainty about how China-America trade war, Britain's Brexit, and Thailand's new administration will end.
Fourth, Thai business world also hopes to see Baht remain weak against U.S. dollar at current exchange rate of 32 Bahat per U.S. dollar, but rising interest rates may bring about capital inflow and Baht's appreciation. Given that Thailand is in the interim period, it is advisable to avoid any influence on export and tourism both of which are Thailand's main economic driving forces.
Fifth, generally MPC refrains from rising policy interest rate during the period around the general election.
Mr. Thanawat predicted, "Within the following time frame set, the most likely scenario is that MPC would maintain the policy interest rate at 1.75 percent... MPC may raise the figure in the second half of this year, perhaps at the turn of the third and fourth quarter, by 0.25 percent."
When asked about Thailand's economic landscape after the general election, Mr. Thanawat said, "The new administration will take office in the middle of this year, and the anticipated growth rate for the second half of this year will stand at 4 percent, higher than that of 3.5 percent for the first half. As the influence of China-America trade war and Britain's Brexit will begin to wane, and Thailand's new administration will start to work on a new budget to stimulate all sectors, Thailand is projected to maintain an overall growth rate of 3.8 percent this year."
"We hold that 2019 general election is unlikely to spark off any protests or disorder. Or in other words, Thailand will remain politically stable without any political vacuum. By the turn of September and October, a new administration will take office to work to boost economy. Under a likely scenario, Thailand would be free from rally problems, Chinese tourists would concentrate on Thailand again, and investors would express less concerns. Given these favorable trends, Thailand is expected to see an overall growth rate of 3.8 percent in 2019," Mr. Thanawat added.
Source: InfoQuest, by Kasamaporn Kittisamphan/Tanawat /Rachada, InfoQuest
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