*
Rates still being normalised
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Further rate hikes to be gradual and not hurt economy
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Baht volatile, c.bank to manage as needed
(Recasts with comments from c.bank official, background)
By Kitiphong Thaichareon and Orathai Sriring
BANGKOK, Feb 15 (Reuters) - Thailand's policy interest
rate will continue to rise even though inflation is likely to
fall this year, but the pace of tightening will be gradual and
will not hurt the economy, a deputy central bank governor said
on Wednesday.
Southeast Asia's second-largest economy is improving this
year and will be even better in 2024, Deputy Governor Mathee
Supapongse told an economic forum.
The vital tourism sector is rebounding and increased income is boosting domestic purchasing power, and exports this year may not be as bad as predicted, Mathee added. In November, the Bank of Thailand (BOT) predicted economic growth of 3.7% this year and 3.9% next year. It will update the projections at its next policy review on March 29, when a further rate hike is expected. The BOT has raised the key rate by a total of 100 basis points since August to 1.50%, a tightening cycle less aggressive than many of its regional peers as Thailand's recovery has lagged that of others in Southeast Asia. Mathee said the current policy rate is not yet at a normal level and further rate increases will also help to build up policy space for any future crisis, but there was no need for aggressive hikes like other countries. "Our interest rate is still in the normalisation process. If we stop doing it, people will think we are satisfied with inflation at the moment," he told reporters on the sidelines of the forum. "But inflation is not back within target yet... and our rate is not too high to hurt people," Mathee said. Headline inflation dropped to its lowest rate in nine months of 5.02% in January, but was still well above the BOT's target range of 1% to 3%. It reached a 24-year high of 6.08% in 2022. Mathee also said the baht was fairly volatile but its levels were still acceptable for businesses, and the BOT will manage it as appropriate. Addressing the same event, Finance Minister Arkhom Termpittayapaisith said Thailand's recovery was slow and steady, boosted by tourism, which was rebounding strongly and would remain the key driver of growth this year. Prime Minister Prayuth Chan-ocha was last week cited as saying Thailand could see more than 30 million foreign tourists this year, gaining momentum with the return of visitors from China. It received a record of nearly 40 million visitors in pre-pandemic 2019, who spent 1.91 trillion baht ($56 billion). Thailand beat its tourism target in 2022 with 11.15 million visitors.
Arkhom said higher spending in the current fiscal year and
the next will also increase investment, adding that the baht
strength was reducing import costs but also cutting export
volumes.
On Monday, he told Reuters that the economy could grow
faster than forecast this year, while the pace of monetary
tightening to contain inflation remained "reasonable".
($1 = 34.11 baht)
(Reporting by Orathai Sriring, Kitiphong Thaichareon
Writing by Martin Petty; Editing by Ed Davies)
