Thailand Sees Drop In Inflation and Economy To Grow By 3%-4%

Thailand's economy is expected to grow between 3% and 4% this year, despite a global slowdown, according to the central bank, with tourism and private consumption being key drivers.

Headline inflation, which was 5.02 percent in January, should return to the target range of 1% to 3% in the second half of 2023, according to the Bank of Thailand, citing a speech given by its governor, Sethaput Suthiwartnarueput, on Monday.

"Supply-side (inflationary) pressures have gradually eased, but demand-side pressures may increase due to the tourism sector's rapid recovery," the BOT said in a statement.

The BOT said it would continue to normalise monetary policy gradually but was ready to adjust as needed, adding that Thailand's financial system was stable and its external position was strong.

The BOT will review policy again on March 29, when economists anticipate another rate hike. The BOT also stated this month that the tightening cycle was not yet complete.

Since August, the BOT has raised the key interest rate by a total of 100 basis points to 1.50 percent, a slower pace than many of its regional peers, as Thailand's economic recovery lags much of Southeast Asia.

The BOT forecasted 3.7% economic growth this year in November. It will release a new forecast next month.

Southeast Asia's second-largest economy grew at a slower pace than expected in 2022, but it is now gaining steam as tourism recovers, aided by the return of Chinese visitors. The BOT anticipates 25.5 million foreign visitors this year, down from nearly 40 million in pre-pandemic 2019.

Exports, another key driver of growth, are expected to rise only 1% this year, with a possible contraction ahead, according to the BOT, blaming the global economic slowdown.

The economy improved in January compared to December, thanks to increased service sector activity and government stimulus measures, according to a separate statement from the BOT.

However, exports fell 3.4% year on year in January and could fall further in February, according to Assistant Governor Chayawadee Chai-Anant at a news conference.

Weakness or strength in the baht has had a little impact on shipments, but the BOT will ensure the currency is not too volatile to hurt the economy, she added.

Thailand posted a current account deficit of $2 billion in January, with a trade deficit at $2.7 billion as imports rose in the month, the BOT said.