The Thai Economy will Rise by Just over 2.5 Percent, with a more Uneven Recovery

According to the minutes of the Bank of Thailand's February 26 monetary policy meeting, which were released on Wednesday, Thailand's GDP grew by little over 2.5 percent this year, which was less than anticipated. The country's economic recovery is also becoming more uneven.

The BOT's monetary policy committee decided to lower the one-day repurchase rate (THCBIR=ECI) by 25 basis points to 2.00% during the meeting, by a vote of 6-1. To keep the rate the same, one member voted.

After a hold in December and a comparable decrease in October, the surprise quarter-point rate cut came next. In December, the bank saw 2.9% economic growth. According to the minutes, the committee stated that growth might be slower than expected and that there would be greater risks in the future. Most members thought that decreasing rates would improve lending conditions, and that 2.00% would provide enough room for policy.

As of the end of September 2024, Thailand's household debt was among the highest in Asia at 16.34 trillion baht which is about USD 486 billion, or 89.0% of income.  Household debt is viewed by the government as a major barrier to growth and consumption.

Furthermore, as per the central bank minutes, "economic recovery became more uneven across sectors," as exports and tourism both grew. "Conversely, manufacturing sectors facing structural challenges, especially the automotive-related and real estate industries, showed further deterioration."

The Thai economy's recession was accepted by the committee as being "driven by structural factors, which required supply-side restructuring policies." Monetary policy was viewed as a tool primarily for managing demand and as having "limited effectiveness in addressing structural issues in the current economic context" by the committee member who voted so. 

According to central bank president Sethaput Suthiwartnarueput, Thailand's key interest rate of 2.0% was deemed stable for the current situation, and the central bank had no plans to change rates often.

Since the level is in line with the present state of the economy, the central bank has stated that the bar would be high for any additional cuts. Through $4.4 billion in stimulus measures and other efforts to promote economic activity, Thailand's government intends to surpass its growth target of 3% this year. The second-biggest economy in Southeast Asia gained 2.5% last year, which was slower than its counterparts. The next rate review by the central bank is scheduled for April 30.