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15 Dec 2017

Thai Economy

MPC Meeting, December 20: Policy Rate Likely on Hold at 1.50&, Economy Gaining Traction (Business Brief No.3718)

We at KResearch are of the view that the Monetary Policy Committee (MPC) will likely maintain its key policy rate at 1.50 percent during the final meeting of 2017 on December 20, because the Thai economy has not fully recovered and 2018 economic performance may rely more on investment than it did last year.

Looking ahead, the policy rate will likely stay at 1.50 percent over the near term since the MPC is not under a lot of pressure to align its monetary policy stance with that of the US FOMC, thanks to Thailand’s solid external stability and relatively high international reserves of over USD200 billion. Moreover, Thailand will likely record a current account surplus of almost 10 percent of GDP in 2017 and 2018. Furthermore, Thailand’s dependency on foreign capital is currently low and our economy is beginning to pick up. Amid gradual rises in inflation, it is expected that the MPC will only hike its policy rate after the Thai economy has gained full traction.

However, the MPC may be forced to maintain the policy rate at the current level if geopolitical conflicts become severe enough to derail the global economy recovery, thus undermining our economic performance, as well.

Thai Economy