Abstract
The MPC voted 5 to 2 to maintain the policy rate at 1.50%, viewing it as accommodative to support the economy, while some members advocated for a reduction to aid recovery and address liquidity issues. Thailand’s economy is projected to slow, especially in the export sector due to U.S. tariffs, with GDP growth in 2025 expected below 2% YoY. Inflation forecasts were significantly revised down, anticipating rates of 0% this year. Financial conditions remain tight, particularly for SMEs, stressing the need for effective monetary policy amidst uncertainties.
Summary
MPC Decision on Policy Rate
The Monetary Policy Committee (MPC) voted 5 to 2 to maintain the policy rate at 1.50%. Most members believe the current monetary stance is appropriate, emphasizing the need for careful timing given the limited policy space. Conversely, two members argued for a rate cut to support economic recovery, especially for vulnerable groups facing liquidity issues.
Economic Outlook and Growth Rate
The Thai economy is expected to slow in the latter half of 2025, particularly due to the impact of U.S. tariffs on exports. The MPC revised its GDP growth projections down slightly, predicting below 2% growth in the second half of 2025. Although the export growth forecast was raised significantly, the anticipated benefits for the economy may be limited due to increased import forecasts.
Inflation and Financial Conditions
The MPC has lowered its inflation forecast for 2025 to 0%, projecting it will remain below target through 2026. Financial conditions in Thailand remain tight, particularly for SMEs, with declining credit demand and rising non-performing loans. The committee aims to maintain an accommodative monetary policy, balancing effectiveness amidst future uncertainties.
