Thai central bank maintains interest rate at 1.25 per cent

BANGKOK, June 2 (TNA) – The Bank of Thailand (BoT) on Wednesday continued the key interest rate unchanged at a record low of 1.25 per cent, reasoning that uncertainties related to the impact of sovereign debt problems in Europe and the domestic political situation remain key risks to Thailand's growth outlook.

BoT assistant governor Paiboon Kittisrikangwan announced the outcome of the Monetary Policy Committee (MPC) meeting on Wednesday.

"Sovereign debt problems in some European economies may dampen the region’s recovery and pose risks to the sustainability of global growth," the BoT said in its statement.

If the Greek debt crisis and the global economy improve, the MPC may revise its forecast that the Thai economy is likely to grow over 5.8 per cent, higher than 4.3-5.8 per cent projected earlier, he said.

In April, economic activities slowed somewhat owing in part to adverse impacts of the domestic political situation on tourism as well as confidence of consumers and businesses.

However, the BoT has projected the Thai economy this year is likely to expand at least 4.3 per cent.

Mr Paiboon conceded that inflation next year is likely to rise in tandem with the recovery of the world economy and higher prices of consumer goods.

It is possible that the core inflation may exceed the target to over three per cent and the MPC may leave the interest rate to increase to a normal rate.

The Thai economy expanded in the first quarter of 2010 at a stronger pace than anticipated. This was driven by strong growth in exports and tourism.

“The major factor that has support economy growth is export and it is believed it will continue to help drive the economy until next year,” Mr Paiboon said.

If the risk factors ease soon, the next MPC meeting may adjust the interest rate to its normal rate, he added. (TNA)