Thai economy projected to expand by 1.8 % in 2021 and 3.9 % in 2022
The Bank of Thailand on 23 June 2021 predicted that the Thai economy would expand by 1.8 % in 2021 and 3.9 % in 2022 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.
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 Bank of Thailand’s Monetary Policy Committee on 23 June 2021 voted unanimously to maintain the policy rate at 0.50 %. 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 and stand ready to use the limited policy space at the most effective timing.
