In view of the economy’s improvement, the Monetary Policy Committee (MPC) yesterday decided to put the policy rate on hold, however, risks remain, particularly the search-for-yield behaviour amid the low interest rate environment.
Jaturong Jantarangs, secretary of the MPC and deputy governor of the Bank of Thailand, said the MPC’s decision came after the country’s economic growth outlook brightened further on the back of the rise in exports, while overall financial conditions continued to accommodate the economic expansion.
The MPC members voted unanimously at their regular meeting to leave the policy rate at 1.50 per cent.
Thailand’s economic growth gained further traction on stronger growth in exports across various product categories and to diverse destinations, continued expansion in tourism and higher agricultural output, Jaturong said.
While expansion in public investment was softer than estimated, private investment was expected to slowly climb as construction investment moderated, he said. The country’s domestic demand, although not sufficiently broad-based, continued to increase gradually, while inflationary pressure also remained low.
Headline inflation gradually rose at a slightly slower pace than expected due mainly to supply-side factors, especially fresh food prices, which declined due to this year’s higher agricultural output following proper weather conditions.
Amid low demand-pull inflationary pressure, inflation expectations remained close to the midpoint of the inflation target even though headline inflation was projected to rise slowly in the latter half of the year from the gradual dissipation of supply-side pressures and the recovery in domestic demand.
The overall financial conditions remained conducive to economic growth with ample liquidity in the financial system.
Government bond yields and real interest rates remained low, with short-term bond yields held down by decreased issuances of short-term central bank bonds and treasury bills.
Given stronger appreciation of the baht against its regional peers in some periods, business adjustments could be affected and the baht needs close monitoring.
Although the country’s cushion against economic and financial fluctuations was sufficient, risks remained particularly the search-for-yield behaviour in the prolonged low interest rate environment that might lead to the underpricing of risks, and a deterioration in the debt serviceability of small- and medium sized enterprises.
The improved growth outlook was still subject to external risks, such as trading partners’ growth outlooks, uncertainties around the Unites States’ economic and foreign trade policies, and geopolitical risks.
Monetary policy should remain accommodative and the central bank stands ready to use the policy tools in its pocket to sustain the economic growth and ensure the nation’s financial stability, he added.
The Commerce Ministry will sign a memorandum of understanding for economic and trade collaboration with Vietnam’s Industry and Trade Ministry during the official visit to Thailand of Vietnamese Prime Minister Nguyen Xuan Phuc from today to Saturday.
Vietnam is Thailand’s seventh largest trading partner. During the past five years, their trade grew 8.8 per cent per year to US$11.17 billion last year.
Their trade during the last six months was up 18.6 per cent year on year to $7.57 billion.
The Commerce Ministry will join the fifth Singapore-Thailand Enhanced Economic Relationship meeting on August 24 in Singapore to further strengthen economic ties and seek ways to expand their trade and investment.
The two countries will discuss possible collaboration in several arenas, including food and agricultural, ICT and cyber security.
Thailand will invite Singaporeans to invest in Thailand’s Eastern Economic Corridor and related infrastructure.
BIG SPENDERS ON REALTY
Investors are allocating more capital to real estate worldwide, with Asian investors now accounting for five of the 10 biggest cross-border spenders.
Inter-regional investment reached US$19.5 billion (Bt649 billion) in the second quarter of this year, up 71 per cent from the same quarter last year, according to JLL, a real estate and investment management firm.
Globally, China was the third biggest source of cross-border capital into real estate in the first half of the year at $6.2 billion, behind Germany and the UK.
After China, Asia’s biggest spenders were Hong Kong ($4.9 billion), Singapore ($4.1 billion), South Korea ($1.9 billion) and Japan ($1.6 billion).
Almost all of their capital targeted the world’s three largest and most liquid real estate markets, with the US receiving $10 billion, the UK pocketing $6 billion and Germany $2 billion.