Results of the Monetary Policy Committee Meeting No. 5/2021

On August 4, 2021, Mr. Thitinan Mallikamas, Secretary of the Monetary Policy Committee (MPC), announced the results of the MPC meeting No. 5/2021, where the committee voted 4 to 2 to maintain the policy interest rate at 0.50% per annum. Meanwhile, 2 votes favored a reduction of the policy interest rate by 0.25% per annum. One member was absent from this meeting.

 

Due to the impact of the COVID-19 pandemic being greater than previously assessed, and significant downside risks remaining, the committee believes that economic risks in the near future are still high. Assistance must be accelerated through liquidity distribution and debt relief for affected groups. Most members agreed that financial measures would be more effective than reducing the already low interest rate, thus supporting the decision to maintain the policy interest rate.

The Thai economy is projected to grow by 0.7% and 3.7% in 2021 and 2022, respectively, reflecting a downward adjustment due to the significant impact on private consumption this year and a substantial decrease in foreign tourist trends next year. However, the Thai economy still has additional support from increased government spending trends from the latest borrowing decree and good export growth, despite some manufacturing sectors being affected by outbreaks in factories and temporary raw material shortages. General inflation rates are expected to remain close to previous levels, and medium-term inflation forecasts remain anchored within target ranges.

“Liquidity in the financial system remains high, but its distribution is not yet widespread due to increased credit risks,” particularly for SMEs and households further affected by the outbreak. The recovery loan measures have helped SMEs access credit more easily. Regarding the exchange rate, the baht has weakened against the US dollar compared to regional currencies due to domestic factors.

 

The committee believes that government measures and policy coordination are crucial for economic recovery. Health measures should expedite the procurement and distribution of effective vaccines to prevent prolonged outbreaks. Fiscal measures should accelerate relief and support the economy by adequately and timely addressing labor market and business vulnerabilities. Monetary policy must continue to support overall financial conditions to remain accommodative.

Financial and credit measures should be improved for greater effectiveness, focusing on distributing liquidity to those affected and reducing debt burdens, such as recovery loan measures, debt moratorium measures, and other initiatives from specialized financial institutions, alongside pushing financial institutions to improve debt restructuring broadly.

The committee continues to prioritize support for economic recovery. It will monitor key factors affecting economic trends, including the distribution and effectiveness of vaccines, the outbreak situation both domestically and internationally, and the adequacy of fiscal and financial measures. The committee is prepared to use appropriate monetary policy tools if necessary. 

 

Read the original content at:  https://www.bot.or.th/Thai/PressandSpeeches/Press/2021/Pages/n5764.aspx