Thai central bank governor expects inflation to be ‘contained’ but sees uncertainty in tourism recovery

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Inflation in Thailand will largely be “contained” because the price pressures in the country are not as broad-based compared to some developed markets, said the governor of Bank of Thailand.

Sethaput Suthiwartnarueput said overall inflation rate will remain within the central bank’s target range of between 1% and 3%.

Even though inflation for January came in at about 3.2%, “we still think that it’s likely to be contained and that we’re not likely to see the kind of high inflation rates that we’ve seen in developed country markets,” the governor told CNBC’s “Streets Signs Asia” on Monday.

The main reason is that inflation pressures are concentrated largely in areas such as the “energy space and with certain kinds of important food prices, like pork,” he explained.

On Wednesday, the Thai central bank kept its key interest rate unchanged at a record low of 0.5%, and said in a statement the economy will continue to recover and the fast spreading omicron variant “would exert limited pressure on the public health system.”

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“In the period ahead, there remained a need to closely monitor developments of global energy prices and domestic goods and services prices, as well as the possibility of growing wage pressures,” the central bank said.

External stability remains resilient

The U.S. Federal Reserve’s expected move to tighten monetary policy would have little impact on Thailand as its external stability remains strong, said Suthiwartnarueput.

“We look quite good. We have very high levels of foreign reserves, low levels of external debt and our current account is pretty much in balance,” the governor noted.

Without a recovery in tourism, it’s very hard for us to see things getting back to normal.

Sethaput Suthiwartnarueput

governor, Bank of Thailand

The Fed has indicated it could soon raise interest rates for the first time in more than three years as part of a broader tightening of easy monetary policy. Major central banks around the world slashed interest rates during the worst of pandemic in a bid to stimulate growth as Covid-19 took a toll, but the Fed has since signaled that it is preparing to raise rates again.

“The kind of stress that comes from the tightening of global financial conditions on that front — I think we have quite a bit of wiggle room relative to other emerging market economies,” he added.

Still, risks remain as the country’s economic recovery remains fragile and uncertain, according to the governor.

Tourism recovery still uncertain

“A lot of our recovery is contingent upon what happens in terms of our tourism recovery,” said Suthiwartnarueput.

He said the government was also concerned about future variants of Covid.

“If a new variant comes out sometime during winter, which is close to the tourism high season, that would be… the kind of risks that we’re concerned,” he added. 

According to the Thai central bank, the number of foreign tourist arrivals in December — particularly those from Europe — accelerated from the previous month, after seasonal adjustment.

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“Nevertheless, the foreign tourist figures remained low as international travel restrictions in many countries remained in place,” it said.

The more substantive impact of tourism is on the country’s wage and employment front, said the governor.

“The employment footprint of tourism sectors that are related, either directly or indirectly, is close to about a fifth of our labor force. So without a recovery in tourism, it’s very hard for us to see things getting back to normal,” Suthiwartnaruepu said.

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