Inflation in Thailand will be largely “under control” as price pressures in the country are not as widespread as in some developed markets, the governor of the Bank of Thailand has said.
Sethaput Suthiwartnarueput said the headline inflation rate would remain within the central bank’s target range of between 1% and 3%.
Even though inflation for January came in at around 3.2%, “we still think it’s likely to be contained and we’re unlikely to see the kind of high inflation rates we’ve seen in the markets. developed countries,” the governor said. told CNBC’s “Streets Signs Asia” on Monday.
The main reason is that inflationary pressures are largely concentrated in areas such as “the energy space and with certain types of important food prices, such as pork”, he explained.
On Wednesday, Thailand’s central bank kept its key interest rate unchanged at a record low 0.5%, and said in a statement that the economy would continue to recover and the fast-spreading omicron variant would “exercise a limited pressure on the public health system”.
Igor Bilic | time | Getty Images
“In the period ahead, it remains necessary to closely monitor developments in global energy prices and domestic prices for goods and services, as well as the possibility of mounting wage pressures,” the central bank said.
External stability remains resilient
The expected decision by the US Federal Reserve to tighten monetary policy would have little impact on Thailand as its external stability remains strong, Suthiwartnarueput said.
“We look pretty good. We have very high levels of foreign exchange reserves, low levels of external debt and our current account is roughly in balance,” the governor noted.
The Fed has signaled it may soon raise interest rates for the first time in more than three years as part of a broader accommodative monetary policy tightening. Major central banks around the world cut interest rates at the height of the pandemic in a bid to boost growth as Covid-19 wreaked havoc, but the Fed has since signaled it is preparing to raise again rates.
“The kind of stress that comes from tightening global financial conditions on that front – I think we have quite a bit of headroom compared to other emerging market economies,” he added.
Still, risks remain as the country’s economic recovery remains fragile and uncertain, according to the governor.
The recovery of tourism still uncertain
“A big part of our recovery depends on what happens in terms of tourism recovery,” Suthiwartnarueput said.
He said the government was also concerned about future variants of Covid.
“If a new variant were to come out during the winter, which is close to the peak tourist season, that would be… the kind of risk we’re concerned about,” he added.
According to Thailand’s central bank, the number of foreign tourist arrivals in December – especially those from Europe – accelerated from the previous month, after seasonal adjustment.
“Nevertheless, foreign tourist numbers remained low as restrictions on international travel in many countries remained in place,” he said.
The most substantial impact of tourism is on the wage and employment front in the country, the governor said.
“The employment footprint of the tourism sectors that are linked, directly or indirectly, is close to about a fifth of our working population. So without a recovery in tourism, it is very difficult for us to see things back to normal,” Suthiwartnaruepu said. .
cnbc Travel to