Monetary Policy Committee’s Decision 2/2021

Mr. Titanun Mallikamas, Secretary of the Monetary Policy Committee (MPC), announced the outcome of the meeting on 24 March 2021 as follows. 

The Committee voted unanimously to maintain the policy rate at 0.50 percent to support the economic recovery which remained highly uncertain. 

The Committee assessed that the Thai economy continued to expand, but downside risks and uncertainties surrounding the economic outlook remained high in the period ahead. The economy would thus need support from the continued low policy rate. The Committee therefore voted to maintain the policy rate at this meeting to preserve the limited policy space to act at the appropriate and most effective timing.

The Thai economy was projected to expand by 3.0 and 4.7 percent in 2021 and 2022 respectively, somewhat lower than the previous projection in line with lower tourist figures and the impacts of the new wave of the COVID-19 outbreak. However, the economy would be supported by a fast recovery in merchandise exports, which was in line with the expansion of trading partner economies, as well as the economic stimulus measures additionally announced. Nonetheless, the recovery would remain uneven across economic sectors. Significant risks included the efficacy and distribution of COVID-19 vaccination, the recovery in foreign tourist figures, and the continuity of fiscal support. The financial system remained sound despite vulnerabilities in some segments due to the negative shocks from the recent COVID-19 outbreak, particularly low-income households and SMEs. Headline inflation was projected to return to the target in the middle of 2021 and would stay close to the lower bound of the target range throughout the forecast period. Medium-term inflation expectations remained anchored within the target. 

Despite ample overall liquidity and low financing costs, the distribution of liquidity remained uneven due to increased credit risks. This was a result of more fragile financial positions, particularly for businesses that experienced slow recovery and households that were additionally affected by the recent outbreak. Long-term government bond yields rose in tandem with US Treasury yields. On exchange rates, the Thai baht depreciated against the US dollar in line with regional currencies. The Committee would closely monitor developments in the financial markets and assess their implications on the recovery in the period ahead, as well as continue to expedite the new foreign exchange ecosystem.

The Committee viewed that the continuity of government measures and policy coordination among government agencies would be critical to support the economic recovery going forward. Monetary policy must remain accommodative. The Committee encouraged the expedition of the new financial rehabilitation measures to support business recovery post-COVID-19 to ensure distribution of liquidity to the affected groups in a targeted manner, reduce debt burden, and support the economic transformation in the period ahead. While financial institutions should accelerate debt restructuring, fiscal measures must continue to sustain the economy. In particular, the government should expedite budget disbursement under the restoration plan once the new wave of the outbreak become well contained. In addition, the government should simultaneously implement supply-side policies to support business restructuring and upskilling of labor, which would help support sustainable economic recovery in the long term.

Under the monetary policy framework with objectives of maintaining price stability, supporting sustainable and full-potential economic growth, and preserving financial stability, the Committee continued to emphasize supporting the economic recovery. The Committee would monitor the adequacy of the government measures and various risks, especially the outbreak situation in Thailand and abroad, in deliberating monetary policy going forward. The Committee would stand ready to use additional appropriate monetary policy tools if necessary. 

Bank of Thailand

24 March 2021