Thai finance minister says pace of monetary tightening ‘reasonable’

By Orathai Sriring and Kitiphong Thaichareon

BANGKOK (Reuters) -Thailand’s economy could grow faster than forecast this year as a revival in tourism quickens, while the pace of monetary tightening to stave off inflationary pressures remained “reasonable”, the country’s finance minister said on Monday.

In an interview with Reuters, Arkhom Termpittayapaisith said the Bank of Thailand had been aligning policy with the needs of the domestic economy rather than mirroring the aggressive pace of tightening by the U.S. Federal Reserve.

“Our central bank’s interest rate adjustments have been reasonable, not following the Fed but consistent with our economy,” said Arkhom.

“Raising rates too much will sharply drag down the economy that is getting better,” he said, adding monetary policy must ensure the economy would fully recover.

The Bank of Thailand has raised the key rate by a total of 100 basis points since August to 1.50%. But its tightening cycle has been less aggressive than many regional peers, as Thailand’s economic recovery has lagged other Southeast Asian countries as the tourism sector only started to rebound last year.

It will next review policy on March 29, when most economists see a further hike.

Arkhom said Thai gross domestic product may beat a forecast of 3.8% growth this year on a rebound in tourism.

“Tourism is playing a key role in supporting the economy … there is a chance that tourist numbers will beat our forecast of 27.5 million this year,” Arkhom said.

Tourism target

Tourism will gather steam this year, with the return of visitors from China, at least 7.5 million of whom are expected to arrive this year following China’s reopening, he said.

Thailand beat its tourism target with 11.15 million foreign visitors in 2022, but was still far from a record of nearly 40 million in pre-pandemic 2019.

For 2022, he expects Southeast Asia’s second-largest economy to grow about 3%, after a 1.5% expansion in the previous year, which was among the slowest in the region.

Growth in the fourth quarter of 2022 is estimated at 2.8% on the year and 0.2% on the quarter, he said. That would be a slower pace than the previous quarter as exports weakened.

The government will report official 2022 GDP data on Friday.

Arkhom played down concerns over the impact on the economy of the strength of the Thai currency, which was moderate compared with peers.

“The private sector said the baht was too strong, but it’s not very strong,” he said. “The baht is strengthening on the fundamentals of the economy that has started to recover”.

The baht has appreciated about 2.2% against the dollar so far this year, becoming Asia’s second-best performing currency after Indonesia’s rupiah.

Arkhom said a transaction tax on share sales, which had been waived for more than three decades, was still in the process of becoming law but this was taking longer than originally expected.

(Reporting by Orathai Sriring and Kitiphong Thaichareon; Additional reporting by Satawasin Staporncharnchai; Editing by Ed Davies and David Holmes)