Thailand’s policy interest rate should remain at 2.75 percent, which is still below the 3 percent inflation, according to a leading academic.
Tanawat Polvichai, director of the economic research centre of the University of Thai Chamber of Commerce, said an interest reduction could possibly deter savings among people who may switch to riskier investments in the stock and property markets.
He said the gross domestic product (GDP) growth projection of 5.3 percent, recently announced by the National Economic and Social Development Board (NESDB), was slightly lower than forecasted but remains higher than 5 percent.
The Monetary Policy Committee (MPC) is scheduled to meet Wednesday amid pressure for a lowered interest rate.
Tanawat, however, said pressure on the MPC has slightly subsided with the baht weakening from Bt28.50 against the dollar last month to Bt29.50 against the dollar and the central bank’s efficiency in stabilizing the Thai currency movement.
He said reducing the interest rate by 0.25 percent, if decided by the MPC, could help stimulate the country’s economy and exports.
Chao Kengchon, managing director of Kasikorn Thai Research Centre, said the baht has gradually depreciated and foreign capital inflows decelerated though the MPC has not made any decision on the interest rate.
He said the most significant impact on the baht is from the US Federal Reserve’s quantitative easing (QE) which strengthens the US dollar, if implemented.
Asia’s stock markets and bonds will become less attractive as the dollar surges, resulting in capital outflow back to the US and depreciating baht.
Chao said the Kasikorn Thai Research Centre will maintain its forecast of Thailand’s GDP growth at 4.8 percent and exports at 7 percent with optimism that the country’s economic situation will improve in the second half of this year.
Investments in the government’s Bt2 trillion infrastructure development will contribute to the country’s economic growth in the fourth quarter, he said.
