Bank of Thailand maintains 4.4% GDP growth forecast amid stimulus measures

A 4.4% GDP growth forecast for the coming year has been maintained by the Bank of Thailand, factoring in the government’s proposed economic stimulus measures. Assistant Governor Piti Disyatat confirmed this projection following the Monetary Policy Committee’s vote on September 27 to hike the benchmark interest rate by a quarter-point, making it a decade-high 2.5%.

The committee, however, reduced its 2023 growth forecast from 3.6% to 2.8%, while simultaneously raising the outlook for the coming year from 3.8% to 4.4%. The digital wallet policy, which is part of the government’s planned 560-billion-baht stimulus plan, and the expansion of domestic commerce and investment schemes, are anticipated to spur a 5% economic expansion next year, according to Prime Minister Srettha Thavisin and Deputy Finance Minister Julapun Amornvivat.

Piti Disyatat suggests that the government’s intended stimulus measures for the upcoming year could generate a fiscal multiplier of 0.3-0.6%, implying that a 100 baht (US$2.80) spend could potentially increase the GDP by 30-60 baht. Piti also voiced his approval of the gradual policy rate hikes by the Monetary Policy Committee since August 2022, considering it a fitting approach, with the current policy rate nearing a neutral level.

“The economy rebounded as anticipated and continues to recover following our policy of gradual rate hikes.”

The central bank’s policy has been to keep inflation in check while fostering a steady economic recovery.

Piti pointed out that the GDP rebounded in the second and third quarters due to domestic demand for private consumption. Non-farm and farm incomes have also seen consistent recovery, surpassing the pre-Covid level.

Policy rate normalisation

He also highlighted the exponential rise in foreign arrivals, from five million at the start of the policy rate normalisation in August 2022, to 20 million currently. Furthermore, the unemployment rate has steadily declined from a pandemic peak of 6% to the current 2.6%, reported Bangkok Post.

The Bank of Thailand has predicted that the nation’s inflation surge will be short-lived, despite the uncomfortable levels of inflation experienced last year primarily due to rising food and oil prices.

“The policy rate should be normalised to a level that is consistent with sustainable growth in the long term.”

Moving forward, recent increases in commodity prices, coupled with growth recovery, are expected to exert inflationary pressures. Piti also noted that the central bank’s rate hikes have been gradual and can be adjusted if required.

According to Sakkapop Panyanukul, Senior Director of the Economic and Policy Department at the central bank, economic growth is expected to gain strong momentum next year. This is due to the anticipated 4.6% increase in private consumption resulting from the government’s stimulus measures and increased investment in large state projects.

Finally, Phurichai Rungcharoenkitkul, Director of the Monetary Policy Strategy Office at the central bank, emphasised the need to limit credit expansion, which was relatively high during the pandemic period. The rising debt burden, reflected by the higher interest rates affecting funding costs, was also noted by him.

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