Thailand should adopt an expansionary policy mix based on fiscal stimulus and monetary easing to achieve stronger and more balanced growth, the International Monetary Fund (IMF) said on Thursday. The country's economic performance continues to be favourable, with growth rising to 3.9 percent in 2017 and exports taking advantage of a strong recovery of global trade, the IMF said in a statement after a staff visit to Southeast Asia's second-largest economy.
Growth, however, has not been broad-based, and export gains have not sufficiently trickled down to household incomes and investments in other sectors, the IMF said. "A frontloaded infrastructure push on macro-critical projects, accompanied by a more accommodative monetary stance, would help support faster growth in domestic demand," it said.
"Monetary easing, coupled with strengthened communication on the commitment to price stability, would help steer inflation back to the target." The IMF said a flexible exchange rate should be the first line of defence against external shocks, with foreign exchange intervention confined to addressing disorderly market conditions.
The central bank, the Bank of Thailand (BOT), on Wednesday raised its economic growth forecast to 4.1 percent from 3.9 percent earlier. The central bank has left its benchmark interest rate unchanged at 1.50 percent, near record lows, since a cut in April 2015. At Wednesday's meeting, the vote to hold the rate was 6-1, with one dissenting vote for a quarter-point rise.
The BOT will next review policy on May 16. Most analysts expect no policy change for the rest of 2018, though some predict rate increases in the second half of the year. The IMF's Executive Board is tentatively scheduled to discuss the staff report in May, the IMF said.