Monetary Policy Committee’s Decision 6/2021

Mr. Titanun Mallikamas, Secretary of the Monetary Policy Committee (MPC), announced the outcome of the meeting on 29 September 2021 as follows.

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

The Committee assessed that the Thai economy in 2021 and 2022 would expand close to the projection from the previous meeting, but uncertainties surrounding the economic outlook remained high. Nonetheless, progress on vaccination and earlier-than-expected relaxation of the containment measures would help support the economy in the period ahead. The most important issue for the Thai economy at present was the implementation of public health measures that would help facilitate the economic and income recovery. The Committee viewed that government measures should be expedited to support the economic recovery. Despite some progress on financial measures, liquidity distribution and debt restructuring should be expedited further for those who were affected. The Committee viewed that financial measures would be more effective than a further reduction in the policy rate, which was already low, and thus voted to maintain the policy rate.

The Thai economy was projected to expand 0.7 and 3.9 percent in 2021 and 2022 respectively, largely unchanged from the August projection. Although the economy in the third quarter of 2021 was affected by the containment measures and a slowdown in exports, significant progress on vaccination and earlier-than-expected relaxation of the containment measures would help restore private sector confidence and boost private consumption for the rest of 2021. The economy in 2022 would gradually recover mainly owing to domestic spending in tandem with improving confidence.  Foreign tourist figures were expected to recover slowly, while merchandise exports would continue to be affected by shortages of containers and semiconductors. The labor market improved from higher income of workers in the services sector and the self-employed in line with economic acitivities. Headline inflation would remain subdued in line with weak domestic demand. Nonetheless, headline inflation forecast and medium-term inflation expectations remained anchored within the target. The Thai economy would still be highly uncertain. Thus, there remained a need to monitor the development in the outbreak and relaxation of containment measures, private sector confidence, as well as the momentum of government measures as these factors would affect the economic recovery going forward.

Despite ample overall liquidity, the distribution of liquidity remained uneven due to increased credit risks, particularly among SMEs and households. Nonetheless, the special loan facility for businesses helped enhance credit access for SMEs. On exchange rates, the baht relative to the US dollar exhibited more volatile movements owing to developments of monetary policy in advanced economies and uncertainties in the Thai economic recovery outlook. The Committee would closely monitor developments in both global and domestic financial markets and continue to expedite the new foreign exchange ecosystem.

The Committee viewed that the government measures and policy coordination among government agencies would be critical to support the economic recovery. Public health measures should strike a balance between containing the outbreak and supporting the recovery of economic activities and income. Fiscal measures should help facilitate the economic recovery by emphasizing on generating income and preparing measures to raise potential growth.Monetary policy must contribute to continued accommodative financial conditions overall. Financial and credit measures should be expedited to distribute liquidity to the affected groups in a targeted manner and help reduce debt burden. These measures included the special loan facility, asset warehousing scheme, and other measures by specialized financial institutions (SFIs). In addition, financial institutions should accelerate debt restructuring 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 continued to put emphasis on supporting the economic recovery. In addition, the Committee would monitor key factors affecting the economic outlook, namely implementation and relaxation of the domestic containment measures 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
29 September 2021