The MPC pointed out that “the policy interest rate at the current level is appropriate in a context where the economy is gradually recovering to its potential level. Facilitates keeping inflation within the target framework sustainably Strengthen long-term economic and financial stability and prevent the accumulation of financial imbalances. It also helps maintain the ability of monetary policy to accommodate uncertainty in the period ahead.”
However, the MPC has lowered its estimate of the economic growth rate (GDP) of 2023 to an expected expansion of 2.4%. In 2024, it is expected to grow 3.2%, but if the results of the project are included. “Top up 10,000 baht via digital wallet” will grow 3.8%.
Expect interest rates to remain constant throughout next year.
In this regard, the Global Markets Group Bank of Ayudhya estimates that the MPC will maintain the policy interest rate for the next several quarters. In 2024 and 2025, the economy is likely to expand at a more balanced rate. from domestic demand travel and the recovery of the export sector
While the Kasikorn Research Center estimates that The MPC is likely to maintain the policy interest rate at 2.50% throughout 2024 if the Thai economy next year continues to recover and expand no less than 2023, including if Thai inflation remains within the MPC’s target range. D. at 1-3% per year
KKP Research by Kiatnakin Phatra Business Group estimated that from the relatively weak economic direction This will make inflation likely to remain low at only 1.7%. In the past, Thai inflation has dropped rapidly and has begun to grow negative. Meanwhile, core inflation began to stabilize. Inflation in Thailand is considered to be one of the fastest countries in the world. This is unlike many countries where inflation has remained high for a long time.
Meanwhile, economic data signals an unclear direction. This makes it more difficult to evaluate the economy for policy implementation. It is expected that the BoT will maintain interest rates at 2.5% throughout 2024, causing the current situation to pose a risk that Thai monetary policy will become too tight.
At present, Thailand’s real interest rate is higher at about 2.5% than the US at about 2%. In the event that the digital wallet policy does not materialize, the chance that the BoT will cut the policy interest rate will be higher.
Interest rates are rising quickly – income can’t keep up
Dr. Pacharapoj Nantaramas,” Executive Vice President, Krungthai COMPASS Research Center, Krung Thai Bank, said that after the MPC maintained the policy interest rate at 2.50% per year, with interest rates on deposits and loans gradually increasing. Previously, the interest rate was followed by the MPC. If we look at it for the next 1 year, we will see that the interest rate will be at this level. The challenge lies in to what extent the incomes of businesses and households can be raised.
Hope next year’s GDP will support income recovery.
In this regard, it can be seen that in the past The interest burden rose quite quickly from the level of 0.50% per year to 2.50% per year, which is considered to have increased 5 times, which is in contrast to the income that did not increase 5 times. However, the Bank of Thailand (BoT) It has been estimated that GDP in 2024 will be at the level of 3.2% and inflation at the level of 2%, reflecting that Normal GDP will be around 5% if it is as expected. Under the burden of interest remaining at 2.50% per year, it is likely that the tension in the household sector will be alleviated.
SME income is still challenging.
The impact of interest and recovery may vary by group. With the country’s average income in terms of Norminal GDP at 5%, it can be seen that civil servants may benefit from the salary adjustment policy. But in terms of the business sector Especially the SME business still has challenges. Because it can be seen that tourists still haven’t arrived as targeted. If looking at the forecast of 35 million people coming in, another 5 million people will still be missing, compared to the pre-COVID-19 period of 40 million people.
Therefore, the number of lost tourists is a source of income for small business groups. that depends on domestic consumption”
Interest costs will hit investments next year.
Dr. Pacharapot” also said that the impact on the economy under the interest rate level of 2.50%, which according to economic principles High interest rates will slow down private investment. This can be seen as an example in the United States where interest rates have been adjusted quite quickly.
Causes the real estate sector to slow down sharply. Although the industrial sector slowed down a little Because the United States has emerging industries. But if compared to Thailand where GDP grew only 2-3%, making it difficult for the private sector to invest Must consider income and cost burden as well. Reflected from economic numbers in September-November that are starting to show a slowdown.
As for the impact of interest on the economy as a whole It will be seen after another 6-9 months. This is in accordance with the principle that the transmission of monetary policy will see results during that period. Therefore, private investment will be affected in full effect from 2024 onwards.
Looking one year ahead, it is expected that the policy interest rate will remain at 2.50%. The challenge will be whether household income and the business sector can grow or not. But at least the pressure or tightness on households from interest burden will be reduced. From before, the interest burden rose faster than income. If everything goes smoothly, the economy can go on. It is believed that the recovery will be better. But those who are still unable to do so may need closer assistance.”
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