BOT: Monetary Policy to Remain Accommodative Amid High Economic Uncertainty

Thai economy is under high uncertainty and monetary policy to remain accommodative as the country suffers from prolonged COVID outbreak, according to Bank of Thailand (BOT).

Assistant Governor Piti Disyatat said, economic recovery may lag others and next year the baseline for the central bank is that financial sectors and monetary policy must be supportive. He furhtur added, BOT used every possible policy measures and to focus on mid-long term impact of policies.

Loss of revenue from the tourism sector lead to economic contraction by 6.1% last year.

BOT maintains its August projection of economic growth of 0.7% and 3.9% in 2021 and 2022 respectively.

Low inflation allowed accommodative room for monetary policy and is expected to stay in the lower bound of targeted range of 1% to 3%. The BOT believes more targeted fiscal and financial measures would be key to economic recovery.

The central bank focused on more financial and debt relief measures, keeping policy rate record low at 0.50% and expected to maintain the same in the next monetary committee meeting on November 10.

Chayawadee Chai-Anant, senior BOT director said, the economy next year will be driven by domestic consumption and supported by robust vaccine rollout but the labor market remains fragile with an expected 3.4 million unemployed or partially employed by the year-end.

Finance minister Arkhom Termpittayapaisith at a seminar today said, monetary policy must be aligned with fiscal measures to ensure sufficient money supply in the system since government stimulus would eventually add to inflation.

“In a crisis like this, monetary policy must stop doing its job for a while to let fiscal policy work,” he said.

Concerning the volatility of the Thai baht, the central bank recently intervened in the currency market to ensure currency fluctuation does not have greater degree of influence on economic recovery.

According to Senior director Sakkapop Panyanukul, the BOT and Finance Ministry reamins vigilant to ensure smooth bond issuance program as well as limit rise in yield.