Bank of Thailand governor strikes hawkish tone as GDP gains 4.6%

BANGKOK • Thailand’s central bank governor struck a hawkish tone after robust economic growth data yesterday, saying officials are waiting for the right time to consider what would be the first interest-rate hike since 2011.

There is less need now for an extremely accommodative stance from the Bank of Thailand (BoT) since the recovery in the economy is clearer, governor Veerathai Santiprabhob told reporters in Bangkok. Thailand can’t go against the global trends in interest-rate policy, he said.

“We need to look at policy space in the future — we need to have enough bullets in hand,” he said, adding that the Monetary Policy Committee will consider the inflation outlook, the strength of the economy and financial stability when deciding on borrowing costs.

The comments came hours after a government report showed South-East Asia’s second-largest economy expanded 4.6% in the second quarter (2Q) from a year earlier, underpinned by solid export growth and domestic spending.

A senior official at the central bank said last month that growth of 4.5% or more in the 2Q could boost the odds of a rate increase.

Key Highlights:

• Gross domestic product (GDP) rose 4.6% from a year ago, down from a revised 4.9% in the 1Q, but higher than the 4.4% median in a Bloomberg survey.

• The government retained its 2018 growth forecast of 4.2% to 4.7%, while raising the estimate for export growth to 10% from 8.9%.

• Growth in private consumption accelerated to 4.5% in the 2Q, while investment also picked up.

• Goods exports surged 7.4%, up from 4.7% expansion in the previous three months.

The central bank has left its benchmark interest rate near a record low of 1.5% for more than two years, in contrast to Asian emerging markets (EMs) from Indonesia to India, which have tightened monetary policy in the face of higher US borrowing costs and financial market turmoil.

Thailand’s hefty foreign reserves and sizable current-account surplus has sheltered the currency from the worst of the EM turmoil. Along with relatively benign inflation, that’s allowed the BoT to stand pat on interest rates. — Bloomberg