Thailand's monetary policy will continue to be very accommodative and any tightening will depend on stronger economic growth, which is still very low at the moment, a deputy central bank governor said on Saturday. Southeast Asia's second-largest economy has yet to regain traction more than a year after the military seized power to end political unrest, with exports and domestic demand stubbornly weak. Growth last year was just 0.9 percent.
"Our monetary policy is considered very accommodative, comparing to the past or other countries," Bank of Thailand Deputy Governor Mathee Supapongse told reporters. "Normalising or raising rates will depend mainly on domestic economic conditions and our growth now is very slow and not broad-based," he said.
On Wednesday, the BOT's monetary policy committee unanimously left the policy interest rate unchanged at 1.50 percent, just a quarter point above its record low. The rate has stayed at that level since two surprise cuts in March and April to help confidence. But some economists think Thailand may start raising the rate next year to stem capital outflows following the Federal Reserve's rate hike. BOT Governor Veerathai Santiprabhob reiterated the bank was not concerned about capital outflows due to Thailand's strong external stability, with a high current account surplus and low foreign debt.
Foreign investors hold only 8-9 percent of bonds issued by the Thai government, central bank and state agencies, compared with over 50 percent in some emerging countries, he added. Mathee said the central bank is proposing an inflation target for 2016 which would take into account government policies to spur growth, as inflation is not a problem now. He gave no further details. The central bank said on Wednesday the economy would grow more than expected this year but 2016 growth will stay close to 3.7 percent - that would still be below the country's full growth potential.