... and from the horses mouth:
Full publication and GDP tables
www.bot.or.th/Thai/MonetaryPolicy/Documents/PressMPC_82018_29PWC51.pdfcommentary below
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No. 78/2018
Monetary Policy Committee’s Decision 8/2018
Mr. Titanun Mallikamas, Secretary of the Monetary Policy Committee (MPC), announced
the outcome of the meeting on 19 December 2018 as follows.
The Committee voted 5 to 2 to raise the policy rate by 0.25 percentage point from
1.50 to 1.75 percent, effective immediately. Two members voted to maintain the policy rate
at 1.50 percent.
In deliberating their policy decision, the Committee assessed that the Thai economy
continued to gain traction on the back of domestic demand while external demand slowed down.
Headline and core inflation were projected to be broadly in line with the previous assessment.
Overall financial conditions remained accommodative and conducive to economic growth.
Financial stability remained sound overall, but it was deemed necessary to monitor risks that might
lead to the build-up of vulnerabilities in the financial system in the future. The Committee viewed
that the prolonged low policy rate had contributed to the economy expanding at the level
consistent with its potential and the inflation target. Thus, most members viewed that the need
for accommodative monetary policy as in the previous period had reduced, and voted to raise the
policy rate at this meeting in order to curb financial stability risks and to start building policy space.
Most members viewed that the policy rate at 1.75 percent would remain conducive to economic
growth. Two members viewed that risks and uncertainties on the external front heightened and
could affect Thailand’s economic growth in the period ahead, and thus saw the need toassess the
clarity of impacts of external factors as well as sustainability of domestic growth momentum for
some time. In addition, the implemented macroprudential measures had addressed certain risks in
the financial stability to some extent.
The Thai economy as a whole continued to gain traction, consistent with its potential,
although merchandise exports were affected by the projected slowdown in the global economy
as well as trade protectionism measures between the US and China. Meanwhile, tourism exhibited
slower growth especially due to the decline in the number of Chinese tourists but started to show
signs of improvement. Domestic demand momentum continued to expand. Private consumption
was expected to expand on the back of increasingly broad-based improvements in non-farm
income as well as additional supports from government measures, while household income in the
agricultural sector slightly declined. Nevertheless, private consumption was restrained by elevated
household debt. Private investment was projected to expand thanks to the relocation of
production base to Thailand and public-private partnership projects for infrastructure investment.
Public expenditure would grow at a slower pace than previously assessed due to delayed
investment by some state-owned enterprises. The Committee would monitor risks associated with
trade protectionism measures between the US and China that could affect momentum of
economic growth in the period ahead.
2
The annual average of headline inflation projection was expected to be broadly unchanged.
However, downside risks remained due to fluctuations in energy and fresh food prices. Core inflation
was projected to rise given the gradually rising demand-pull inflationary pressures. The Committee
viewed that structural changes contributed to more persistent inflation than in the past. Such
changes included the expansion of e-commerce, rising price competition, and technological
development which reduced costs of production.
Financial conditions over the previous period had been accommodative and conducive to
economic growth with ample liquidity in the financial system. Real interest rates remained low,
allowing financing by the private sector to continue expanding. Loans extended to large businesses
and consumer continued to grow. The Committee assessed that, although the policy rate increased
by 0.25 percent, overall financial conditions would remain accommodative and conducive to
economic growth. With regard to exchange rates, movements of the baht against the US dollar
were broadly stabilized compared withthose of regional currencies.Looking ahead, the baht would
likely remain volatile, and thus the Committee would continue to closely monitor exchange rate
developments as well as impacts on the economy.
Financial stability remained sound overall but there remained a need to monitor risks arising
from the prolonged low interest rate environment that might pose vulnerabilities to financial
stability in the future, especially the search-for-yield behavior that might lead to underpricing of
risks. The Committee viewed that the policy rate increase at this meeting would help curb
accumulation of vulnerabilities in the financial system in conjunction with the macroprudential
measures already implemented.
Looking ahead, the Thai economy was projected to continue to gain traction despite the
slowdown in external demand. The Committee viewed that accommodative monetary policy
would remain appropriate in the period ahead, and thus would continue to closely monitor
developments of economic growth, inflation, and financial stability, together with associated risks,
in deliberating appropriate monetary policy in the period ahead.
Bank of Thailand
19 December 2018
For further information, please contact: Monetary Policy Strategy Division
Tel: +66 2283 6186, +66 2356 7872
E-mail: MPStrategyDiv@bot.or.th
