Monetary Policy Committee’s Decision 4/2021

​Mr. Titanun Mallikamas, Secretary of the Monetary Policy Committee (MPC), announced the outcome of the meeting on 23 June 2021 as follows.

The Committee voted unanimously to maintain the policy rate at 0.50 percent.

The Committee assessed that the Thai economic recovery would be slower and more uneven than the previous forecast due to the third wave of the COVID-19 outbreak. Downside risks to the economic outlook also remained significant from the new wave of the outbreak. The Committee viewed that financial measures, particularly special loan facility for businesses as well as debt restructuring, should be expedited. These measures would reduce financial burden for the businesses and households affected by the outbreak in a more targeted manner than cutting the policy rate, which was already at a low level. The Committee thus voted to maintain the policy rate at this meeting and stand ready to use the limited policy space at the most effective timing.

The Thai economy was projected to expand by 1.8 and 3.9 percent in 2021 and 2022 respectively. This would be lower than the previous projection owing to lower foreign tourist figures and domestic demand held down by the third wave of the outbreak. The labor market would be more fragile and recover slowly, particularly the service sectors and the self-employed. However, the economy would be supported by higher public expenditure thanks to the Emergency Decree Authorizing the Ministry of Finance to Raise Additional Loans to Solve Economic and Social Problems as Affected by the Coronavirus Disease Pandemic, B.E. 2564 (2021) as well as by the improving merchandise exports in line with the global economic recovery. Headline inflation would temporarily increase in the second quarter of 2021 due to the low level of crude oil prices in the same quarter of last year. Meanwhile, higher inflation in advanced economies and global supply shortages would have limited impact on domestic inflation. Medium-term inflation expectations remained anchored within the target. Downside risks to the economic outlook also remained significant from the possibility of the outbreak situation in Thailand and abroad becoming more severe owing to virus mutations. The Committee would closely monitor these risks which would affect foreign tourist figures as well as domestic economic activities. 

Despite ample overall liquidity, the distribution of liquidity remained uneven due to increased credit risks, particularly among SMEs and households that were additionally impacted by the third wave of the COVID-19 outbreak. Long-term government bond yields remained stable. On exchange rates, the Thai baht relative to the US dollar depreciated more than regional currencies. The Committee would closely monitor developments in both the global and domestic financial markets and 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 impacted by the new outbreak. Short-term measures to accelerate the procurement and distribution of vaccines would prevent the outbreak from being prolonged. Fiscal measures would play a crucial role in driving the economic recovery amid high uncertainties. Thus, the government should accelerate the disbursement of relief and other fiscal support measures to provide adequate and continuous economic stimulus as well as address vulnerabilities in the labor market. Meanwhile, monetary policy must remain accommodative. The new financial rehabilitation measures to support business recovery post-COVID-19 and other measures by specialized financial institutions (SFIs) should accelerate the distribution of liquidity to the affected groups in a targeted manner, reduce debt burden, and support the economic recovery. In addition, financial institutions should accelerate debt restructuring. The Bank of Thailand would closely monitor the progress and assess the efficacy of financial and credit measures. 

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 put emphasis on supporting the economic recovery. In addition, the Committee would monitor key factors affecting the economic outlook, namely the distribution and efficacy of COVID-19 vaccines, the possibility of the outbreak situation in Thailand and abroad becoming more severe owing to virus mutations, as well as the adequacy of fiscal, financial, and credit measures. The Committee would stand ready to use additional appropriate monetary policy tools if necessary.

Bank of Thailand

23 June 2021