BoT inflates hopes: Targets snug 1-3% to turbo-charge economy
In a bold move to turbo-charge Thailand’s economic engine, the Bank of Thailand (BoT) pegged its hopes on keeping inflation between a snug 1% and 3%.
The aim is to shift the economy into top gear, with deputy governor Piti Disyatat revealing at the Monetary Policy Forum that they’re targeting headline inflation of 1.2% by 2025. That’s a noticeable bump up from 2024’s predicted 0.5%, but still neatly in the sweet spot.
Core inflation, stripping out the unpredictable culprits like fresh grub and energy, is also set to climb to 0.9% by 2025. Finance Minister Pichai Chunhavajira chirped post-meeting with the central bank, backing the idea that a 2% inflation rate is just the economic booster needed.
Thailand has seen a whisper of inflation this year, clocking in at 0.2% year-on-year over the first nine months, with core inflation averaging at 0.48%, Pichai said.
“We’re on course. Hitting 2% won’t rock the boat, it’s still within our sails.”
The inflation target is no random number, it’s carefully crafted to sync up with Thailand’s economic growth dreams of 2.8-3%. With an eye on long-term boons, there’s chatter about structural reforms cranking Thailand’s growth dial even higher.
Inflation influencers
Inflation in Thailand is steered by a mix of home-grown and global factors, with both playing an equal part in the mix. Energy and fresh food, which are unpredictable at best, make up a hefty 90% of domestic demand-side inflation influencers, Piti said.
“Global competition and government price smoothing schemes like the Oil Fuel Fund keep inflation on its toes.”
Any fears of deflation are being shown the door, as there’s no sign of prices taking a nosedive. Meanwhile, economic growth is cruising towards a forecasted 2.7% for 2024, tweaking up to 2.9% come 2025. The balancing act is expected to get a boost from thriving tourism and exports, noted assistant governor Sakkapop Panyanukul.
Foreign tourists are pouring in, with arrivals expected to hit a dazzling 36 million this year, ascending to a whopping 39.5 million by 2025. The tourist tills are ringing with income projected to hit 1.4 trillion baht this year and escalating to 1.6 trillion next year, according to Sakkapop.
But all’s not plain sailing—storm clouds linger with US-China trade tensions and geopolitical dramas like Middle Eastern flare-ups. Particularly, the simmering backdrop of the upcoming US presidential election adds a dash of unpredictability.
So, while there are challenges on the horizon, Thailand’s central bank is steering a steady course, courting inflation to keep the economy vibrant and poised for action.
Frequently Asked Questions
Here are some common questions asked about this news
Why does Thailand aim to maintain inflation between 1% and 3%?
To align with and support its economic growth potential, enhancing stability and fostering sustainable development.
How might structural reforms impact Thailand’s inflation and growth?
Reforms could boost growth potential and stabilize inflation by addressing underlying economic inefficiencies and enhancing competitiveness.
What if Thailand’s inflation surpasses the 3% target?
Exceeding this target could disrupt economic stability, affecting purchasing power, cost of living, and possibly necessitating policy adjustments.
How do external factors weigh on Thailand’s inflation control efforts?
External factors like global trade tensions contribute significantly, complicating domestic inflation management and requiring adaptive strategies.
What role does tourism play in balancing Thailand’s economic growth?
Tourism drives revenue and employment, helping offset risks from other volatile sectors, and is crucial for steady economic expansion.
