By Orathai Sriring, Kitiphong Thaichareon and Thanadech Staporncharnchai
BANGKOK (Reuters) -Thailand’s monetary policy is relatively accommodative and the central bank is ready to ease again, if needed, to support the economy through the global trade war, a deputy central bank governor told Reuters on Friday.
Southeast Asia’s second-largest economy should have grown by about 2.5% in the first quarter year-on-year, Bank of Thailand Deputy Governor Piti Disyatat said in an interview.
While that would be a slowdown from the annual 3.2% pace in the final quarter of 2024, Piti said the economy was not expected to have contracted on a quarter-on-quarter basis.
First-quarter GDP data will be released on May 19.
“We are positioned for the incoming storm, and we have limited policy space. We have to use that when it is most effective and needed,” the deputy governor said.
On Wednesday, the central bank cut its key interest rate by a quarter point for a second straight meeting, and lowered its growth forecast for 2025 to 2% on an assumption that U.S. tariffs stayed near the current rate of 10%.
“The stance I would say is somewhat accommodative,” he said of monetary policy, with the benchmark rate at a two-year low of 1.75%.
“But because those challenges are quite uncertain, the policy going forward will be outlook dependent.”
The next meeting is on June 25.
FISCAL SPACE
Fiscal policy space is also limited, and planned government stimulus measures should be reassessed in the current context.
“Fiscal space has to be used very carefully for what is really needed,” Piti said.
Thailand is among the Southeast Asian nations hardest hit by U.S. President Donald Trump’s measures, facing a 36% tariff if a reduction cannot be negotiated before a U.S. moratorium expires in July.
Thailand will seek tariffs similar to those of trade competitors, Finance Minister Pichai Chunhavajira said on Thursday. The country’s trade negotiations with Washington have been postponed as the United States has asked Bangkok to review important issues.
Given the U.S. concerns about the management of the currencies of its trading partners, Piti said Thailand’s exchange rate framework should not be seen as an issue.
“Our management of the baht has been to lower volatility, not a level,” he said. “It’s actually appreciated a little bit”.
Piti expected second-quarter growth to be stable, with the impact of tariffs to be seen in the second half of the year.In its review of forecasts, the Bank of Thailand said growth could slow to just 1.3% this year if the trade war escalated and U.S. tariffs are set at half the proposed rates.
While headline inflation this year is expected to be below the target range of 1% to 3%, medium-term inflation expectations remain anchored within the target, he said.
Core inflation is seen stable this year and is not reflecting weak domestic demand or deflation, he added.
The baht’s exchange rate reflected economic fundamentals, he said, adding the bank would ensure it does not become too volatile.
(Reporting by Orathai Sriring, Kitiphong Thaichareon and Thanadech Staporncharnchai, Editing by John Mair and Louise Heavens)
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