The Bank of Thailand’s Monetary Policy Committee assessed that the impact of the recent COVID-19 outbreak on the Thai economy would be less severe than that of last year because of less strict containment measures.
While the new wave of the COVID-19 outbreak and the containment measures would affect the Thai economy in the short term, the economic recovery continued to be on track thanks to government measures and export recovery.
Nevertheless, uncertainties surrounding the economic outlook remained high with considerable downside risks. The economy would thus need support from the continued low policy rate. The Committee therefore on 3 February 2021 voted to maintain the policy rate at 0.50 percent to support the economic recovery, which remained highly uncertain.
It expected that the Thai economy’s expansion would be somewhat lower than the previous forecast. Nonetheless, the recovery prospect remained highly uncertain, which would in the short term depend mainly on the situation of the new wave of the COVID-19 outbreak and corresponding containment measures.
At a longer horizon, it would depend on (1) the recovery in foreign tourist figures, (2) efficacy and coverage of COVID-19 vaccination, (3) continued and sufficient fiscal support, and (4) the labor market situation, which became more fragile as the numbers of unemployed and underemployed workers were expected to rise in the short term.
Furthermore, recovery across economic sectors was likely to be more uneven, which would affect the sustainability of the economic growth going forward. The financial system remained sound despite increasing vulnerabilities in some segments due to the negative shocks from the recent outbreak. In particular, low-income households and SMEs became more vulnerable.
Headline inflation was projected to return to the target in the middle of 2021 and would stay close to the lower bound of the target range throughout the forecast period. Medium-term inflation expectations remained anchored within the target.
Source: The Government Public Relations Department