InfoQuest (June 24, 2021) -- The Monetary Policy Committee decided to leave the interest rate policy at 0.50 percent amid the COVID-19-induced recession.
"The Committee estimated that the resurgence of the pandemic will curb economic development and Thailand will face a significant low-risk trend," Said Mr. Titanun Mallikamas, Secretary of the Monetary Policy Committee.
"The Committee maintained the interest rate policy unchanged and adopted proper monetary policies at the right timing," added Mr. Titanun.
Meanwhile, the Committee revised down its 2021 and 2022 forecast for the Thai economy to 1.8 percent and 3.9 percent in 2021 and 2022 respectively, due to decreasing foreign tourists and the impact of the pandemic on domestic demands.
However, Thailand has seen increasing government expenditure and a strong export recovery.
Judging from the low base of crude oil price in the same quarter of last year, the inflation rate accelerated temporarily in the second quarter of 2021. However, the rising inflation rate and supply constraints in major economies have a limited impact on Thailand's inflation rate, and it is expected that the medium-term inflation rate will remain in the target range.
"The pandemic, with severe virus variation, will continue to impair tourism and domestic economic activities," said Mr. Titanun.
The overall liquidity remains at a relatively high level, but the increase of credit risk leads to uneven distribution. In particular, small and medium-sized enterprises and households have borne the brunt, while Thailand has managed to keep the yield of long-term government bonds stable.
The Thai baht has depreciated against the US dollar against the trend of regional currencies. The Committee proposed to focus on the development of global and Thai financial markets, including continuously promoting the creation of the FX ecosystem.
The Committee stressed the importance of continuing government measures and policy coordination in economic recovery, and urged the government to speed up the implementation of relief measures to stimulate the economy and rejuvenate the fragile labor market.
Meanwhile, monetary policy must remain loose. The Bank of Thailand will pay close attention to the progress and evaluate the effectiveness of fiscal measures and financial credit measures.
According to Mr. Titanun, while maintaining the stability of the financial system, it is necessary to achieve sustainable economic growth and give full play to economic potential.
The Committee will pay attention to the distribution and effectiveness of vaccines, and the adequacy of existing fiscal measures and financial credit measures, to drive economic development.
Source: InfoQuest, by Kasamaporn Kittisamphan/Sasitorn Simaporn, translated by Xinhua Silk Road
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