Thailand heads for modest rate hike as tourism rebounds

Friday, January 27, 2023

As the economy gathers momentum from returning foreign tourists, Thailand is headed for its fourth straight quarter-point benchmark rate increase to ward off lingering price pressures, as per Bloomberg.com.

The website reports that Bank of Thailand will raise the one-day repurchase rate by 25 basis points to 1.50% on Wednesday, according to 19 of 20 economists surveyed by Bloomberg. One analyst expects the central bank to hold the rate to cool a currency that has risen 17% since slumping to a 16-year low in October.

Thai policymakers, who have lagged peers in the current tightening cycle, are expected to sustain their “gradual and measured” rate moves amid elevated price gains that may be spurred by the influx of travelers from China’s reopening.

While Thailand’s headline inflation is off the peak, the core gauge remains the fastest since 2008.

Although a rising baht helps damp imported prices, exporters complaining about the currency’s rally hurting competitiveness could complicate BOT’s decision. A group of Thai shippers asked the central bank on Tuesday to delay further rate increases.

The central bank will probably upgrade its tourism forecast this year from the 22 million visitors projected in November, Bloomberg noted. The government has already lifted its outlook to 25 million after China’s announcement of its reopening.

About 28% of Thailand’s 40 million annual visitors before the pandemic were from China. Tourism accounts for at least 12% of Southeast Asia’s second-largest economy and a fifth of jobs while private consumption makes up 50% of GDP.

Thailand attracted 11.2 million overseas travelers in 2022, surpassing the government’s 10 million estimate. China’s approval for tour groups to travel to some countries including Thailand starting next month will be another boost.

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