The Bank of Thailand insists on “maintaining interest rates” in a direct agreement with the government. Digital wallets have the opportunity to raise the GDP to 3%.

The Monetary Policy Committee (MPC) meeting on 12 June 2024 voted by 6 to 1 to maintain the interest rate at 2.50% per annum, with one vote agreeing to reduce the interest rate by 0.25% per annum.

The Thai economy is likely to expand from domestic demand and the tourism sector, said Piti Disayathat, secretary of the Monetary Policy Committee. At the same time, exports expanded at a low level. Some export product groups are under additional pressure due to increased competition. Especially automotive products and solar cells.

Inflation is likely to rise gradually. It is estimated that it will return to the target framework from Q4 2024, but look to the next 2-3 months. The inflation rate is expected to be less than 1% as a result of the low base in the same period last year. The majority of the Committee agreed that the current interest rate is at a level consistent with economic expansion towards its potential and the maintenance of economic and financial stability. Therefore, it was considered appropriate to maintain the interest rate at this meeting.

While one committee member agreed that the interest rate should be reduced by 0.25% annually to match the economic potential that expands less due to more obvious structural factors. It will help reduce the burden on the debtor to some extent.

After the NESDB reported that the GDP for the first quarter of 2024 expanded better than expected at 1.5%, indicating that the economy is clearly recovering. Despite the delay in budget disbursement, it is still a factor hindering growth. But the tourism sector and private consumption continued to expand. Therefore, the Monetary Policy Committee believes that the economy is likely to expand continuously. It still estimates GDP in 2024 at 2.6%, and estimates the economy for the remaining quarters of the year as follows.

• In the second quarter, GDP is expected to grow by more than 1.5%.
• In the third quarter, GDP is expected to grow by more than 2.5%.
• In the fourth quarter, GDP is expected to grow by 4%.

But as for the issue, the Economic Cabinet meeting aims to push GDP growth in 2024 to 3% from the current forecast of 2.4% by accelerating 3 important driving forces, including tourism. Government budget disbursement and private investment The Monetary Policy Committee believes that the Thai economy has an opportunity to expand by up to 3% if the government budget disbursement is accelerated. Or the results of implementing the digital wallet project, and this will have a significant impact in the fourth quarter of 2024 and the first quarter of 2025.

In this regard, additional government stimulus measures will be issued. Not much has changed in the general direction of the economy. Therefore, the current interest rate is appropriate because it can absorb the high risk (upside risk) and low risk (downside risk) that will come from the export sector.

In addition, the Monetary Policy Committee Secretary also explained that inflation has fallen from the range to the lower range partly as a result of measures to help people's living expenses. Is it a measure to support oil prices or electricity prices? Currently, Thailand pays oil and electricity prices lower than world market prices.

In addition, inflation previously rose to 8% outside the upper range as a result of geopolitical conflict factors. The Russian-Ukrainian war has nothing to do with domestic demand or monetary policy. Therefore, it is necessary to know the nature of inflation through what factors can be controlled. What can't be controlled? So what are the important factors in determining monetary policy?

To set an inflation framework of 1% to 3%, let us consider the economic trend in the medium term. By looking at the fundamentals of the economy, what level of inflation allows the economy to expand according to its potential? Not too high to create problems with family living expenses. And not so low as to cause monetary policy tightening. Therefore, the 1-3% monetary framework is a level that is consistent with the fundamentals of the Thai economy. It is a framework close to foreign countries.