Mr. Piti Disyatat, Secretary of the Monetary Policy Committee (MPC), announced the outcome of the meeting on 30 March 2022 as follows.
The Committee voted unanimously to maintain the policy rate at 0.50 percent.
The Committee assesses that the Thai economic recovery will remain intact in 2022 and 2023, despite impacts from sanctions against Russia which led to higher energy and commodity prices and a slowdown in external demand. Average inflation for the full year 2022 will exceed the target range but is expected to decline and return to target in early 2023 with energy and food prices stabilizing. The Committee assesses that recent increases in inflation have stemmed primarily from cost-push factors, while demand-pull inflationary pressures have remained subdued. The Committee thus voted to maintain the policy rate at this meeting to help facilitate a sustained economic recovery.
The Committee assesses that the Thai economy will continue to grow at the rate of 3.2 percent in 2022 and 4.4 percent in 2023 on the back of improving domestic demand and tourism. The impact of the Omicron variant outbreak on economic activities is expected to be more contained than previous waves. Sanctions against Russia have pushed the cost of goods higher but will not derail the overall recovery path. Nonetheless, downside risks to growth remain, including (1) prolonged shortages of raw materials in certain industries and (2) the impact of higher prices on living costs for households and production costs for businesses, particularly toward vulnerable groups. The Committee will closely monitor developments in the abovementioned situations closely.
Headline inflation is projected to be at 4.9 percent in 2022 and 1.7 percent in 2023. Inflation will exceed 5 percent in the second and third quarters of 2022, driven mainly by rising energy prices and the pass-through of food prices. However, inflation is projected to decrease and return to the target range in 2023 owing in part to the assessment that the rise in energy prices would not persist. Upside risks to inflation remain, primarily from higher-than-expected oil prices and cost pass-through from producers to consumers. The Committee judges that the rise in inflation has been mainly due to cost-push factors. Meanwhile, demand-pull inflationary pressures remain subdued in line with a slow recovery of income, and medium-term inflation expectations remain anchored within the target range. The Committee will continue to closely monitor inflation dynamics to ensure that medium-term inflation expectations will be consistent with the monetary policy target.
Overall financial conditions remain accommodative. Liquidity in the financial system remains ample, although liquidity distribution still varies across economic sectors. On exchange rates, the baht has depreciated relative to the US dollar due to concerns over the Russia-Ukraine war and the expectation of monetary policy normalization in advanced economies. The Committee will closely monitor developments in both global and domestic financial markets, and continue to expedite the new foreign exchange ecosystem, particularly through supporting SMEs in hedging against risks from exchange rate volatility.
The Committee views that government measures and policy coordination among government agencies will be critical to support the economic recovery amid heightened uncertainties. Fiscal measures should support the economic recovery in a targeted manner, with a focus on generating income and alleviating living expenses for vulnerable groups. Monetary policy should contribute to continued accommodative financial conditions overall. Financial and credit measures have helped distribute liquidity and reduce debt burden, especially for those whose incomes have not yet fully recovered. The measures have included the special loan facility, asset warehousing scheme, and other measures by specialized financial institutions (SFIs). In addition, financial institutions should accelerate debt restructuring in a sustainable manner to have broader impacts and be consistent with borrowers’ long-term debt serviceability.
Under the monetary policy framework with objectives of maintaining price stability, supporting sustainable and full-potential economic growth, and preserving financial stability, the Committee continues to put emphasis on supporting the economic recovery. The Committee will closely monitor key factors affecting the economic and inflation outlook, namely, global energy and commodity prices, higher cost pass-through, and geopolitical risks that could elevate and pose uncertainties in the period ahead. The Committee stands ready to use appropriate monetary policy tools if necessary.
Bank of Thailand
30 March 2022
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