The Bank of Thailand’s Monetary Policy Committee (MPC) on August 2 announced a rate hike for the seventh time since August 2022, resulting in a policy rate at 2.25 percent, the highest rate in 9 years.
Pongsak Luangaram, assistant professor and lecturer at Chulalongkorn University’s Faculty of Economics, said the central bank has one more chance to raise the interest rate this year, leading to the rate remaining at 2.5 percent, mainly because of the risk of inflation.
Although the inflation rate started to slow down due to high inflation last year, there are still risks for the future, especially with regard to El Nino, which could significantly affect food prices.
“We are not putting on the brakes like the FED, but we are coming off the gas pedal of expansionary monetary policy because the Thai economy is recovering more slowly than many countries, unlike the U.S., whose economy is growing so fast that they have to put on the brakes,” ha said
Pongsak responded to public concern about the delay in forming a government, whether 3 or 6 months, which could jeopardize government investment, that the money share from government investment is relatively small compared to GDP. The government spending is still normal, while private sector investment and consumption are having a greater impact on the economy, which he believes is improving.
“If you ask the public, everyone knows that if the Pheu Thai Party leads the formation of the government, several pro-economic measures will follow, be it the distribution of money or the increase of wages. I believe that if Pheu Thai comes to power, the party will focus on fiscal policy to show the public that the party is working. At the same time, monetary policy is less loose so the economy can return to normal,” Pongsak said.
He added, however, that the delay in forming a government or the conflict in parliament is not as much of a concern as the violence on the streets, which has a direct impact on the tourism industry and affects the economic recovery.
Piti Disyatat, Bank of Thailand assistant governor had previously said of the political risks to the economy that the delay in forming a government would affect the distribution of the budget, resulting in the budget being implemented 2 quarters slower than planned, or that the budget could not be used until early 2024.
Previously, only a 1 quarter delay was expected. In addition, this would affect the budget process and policy, which in turn would affect private confidence and investment, both domestic and foreign.
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