The Bank of Thailand’s (BOT) monetary policy committee voted unanimously to raise the one-day repurchase rate to 1.50% at its first review of the year.
Of 23 economists polled by Reuters, 21 had expected a quarter point hike while the remaining two forecast no change.
Thailand’s economy is expected to continue growing while headline inflation should decline, the central bank said in a statement.
Any further rate hikes would be gradual and measured, it said, but added it stood ready to adjust them as needed.
“The committee deems that a continuing gradual policy normalisation is an appropriate course for monetary policy consistent with the growth and inflation outlook,” the BOT said.
But it added it expected “increased risks from demand-side inflationary pressures due to the economic recovery”.
Exports were also expected to slow this year before picking up in 2024 alongside a global recovery, it said.
With Wednesday’s move, the central bank has raised the benchmark rate by a total of 100 basis points (bps) since August.
The tightening cycle has been less aggressive than many of its regional peers, however, as Thailand’s economic recovery has lagged that of other Southeast Asian countries. Its vital tourism sector only started to rebound late last year.
Average headline inflation hit a 24-year high of 6.08% last year, far above the BOT’s target range of 1% to 3%.
In November, the BOT forecast Southeast Asia’s second-largest economy would grow 3.7% in 2023, after estimated growth of 3.2% last year, and that inflation would drop to 3%. Official 2022 gross domestic product (GDP) data is due next month.
The BOT also bumped up its tourism forecasts on Wednesday, saying it expected foreign arrivals at 25.5 million this year and 34 million next year, versus previous forecasts of 22 million and 31.5 million, respectively. Thailand received a record of nearly 40 million visitors in pre-pandemic 2019.
China’s reopening is expected to further boost Thailand’s tourism, with the government predicting at least five million Chinese visitors this year, about half of the 2019 figure.
The baht currency was largely unchanged at 32.77 to the dollar after the policy announcement. It has appreciated by 5.3% so far this year, becoming Asia’s best performing currency, driven by a weaker dollar and China’s earlier-than-expected reopening.