Thai Finance Minister Supports Small Rate Increase to Protect Growth
- Third-quarter inflation is anticipated to peak as oil prices decline.
- According to base effect, 2Q growth "may not be so great," adds Arkhom.
According to the nation's finance minister, Thailand's central bank should avoid a sharp path of policy tightening to safeguard the economy's fledgling recovery and control the worst inflation in far more than a decade.
Two days before the Bank of Thailand's rate review, Economy Minister Arkhom Termpittayapaisith stated during an interview at his offices in Bangkok: "They have to make sure the economy improves, and at the same time they can cut down inflation." "If you need to grow, then the rate increase may not be as certain."
To control inflation, which is now sitting at a 14-year high, the BOT is anticipated to increase borrowing prices from a historical low on Wednesday. In order to avoid stalling the economy's recovery from the epidemic, the authority defied the trend of federal reserve from India and the Philippines in raising interest rates.
However, the BOT's rate decision this week may be measured. In a Bloomberg survey conducted as of Monday, 24 out of 27 analysts projected a quarter-point rise on Wednesday, the with remaining 3 predicting a half-point increase.
According to Arkhom, who said that he has spoken with BOT Governor Sethaput Suthiwartnarueput, the central bank must take into account how steps to control inflation may effect consumer and business costs. The finance head stated, "We must to balance, trying to ensure we are on the path to recovery.
Through incentives for gasoline and power costs, the government, according to Arkhom, too has done its part to combat growing prices.
Tourism Increases
"You can fight inflation, but how much? We also need individuals to spend money, Arkhom said. He predicts that inflation, which was 7.6% last month, will peak this quarter and then begin to decline as oil prices throughout the world decline.
Stronger spending is already making a comeback in the Southeast Asian country as tourist picks up and family earnings begin to increase. According to the most recent official predictions, the number of international visitors might increase to 30 million from around 10 million in the year and.
On August 8, Termpittayapaisith
According to Arkhom, who forecasted that Thai economy will fully recover by 2024, "the upside on growth in the economy largely hinges on tourism." Thailand regards tourism as a significant source of income and welcomed 40 million international visitors in the year prior to the outbreak.
Although growth in the three months prior to June "may not be so high" owing to ground from a 7.7% GDP expansion in the second quarter in 2021, he added, overall gross domestic product expansion is projected to hit 3.5% for this year. On August 15, the government will release the information.
Poor Baht
Regarding the rate of exchange, Arkhom stated but while exporters are content when the baht is trading around 34–35 per dollar, a fixed exchange rate regime is crucial for companies as it also drives up the cost of imports, particularly oil.
According to him, the central bank needs to be aware of how nations like the US, which has repeatedly accused Thailand of economic warfare, regard involvement. The baht has lost roughly 8% of its value over the last six months, ranking third worst among the major Asian currencies analyzed by Bloomberg.
On Tuesday, the exchange rate rose as much a 0.9% to the a nearly six-week record of 35.41 to the US dollar.
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