Thailand sees policy rate rise, higher GDP next year

Thailand's benchmark interest rate is expected to rise next year following an anticipated hike by the US Federal Reserve and recovery in the domestic economy, a senior ministry official said today. The policy rate is likely to rise to 1.75% late next year from the current 1.5%, Kulaya Tantitemit, chief economist at the ministry's Fiscal Policy Office, told reporters. The central bank's monetary policy committee (MPC) reviews policy next on November 4 and most economists expect no change after two surprise cuts in March and April to help activity. The military took power in May 2014 but has struggled to revive Southeast Asia's second-largest economy, with exports and domestic demand still weak. Growth last year was 0.9%. The ministry reiterated its 2015 economic growth forecast of 2.8%, cut last week from 3%. "Falling exports are the main reason for the downgrade for this year," Kulaya said, adding exports might contract 5.4% this year, rather than fall 4% as seen previously. That would mark the third straight year of declining exports. Deputy Prime Minister Somkid Jatusripitak said today that despite the weakness: "Thai exports have still performed better than in many other countries... so we don't have to panic." The ministry's revised growth forecast for 2015 is still higher than the central bank's 2.7%, which some economists believe is still too optimistic. For next year, the ministry predicted growth of 3.8%, the top end of a 3.4 to 3.8 percent range revealed last week, driven by higher public investment spending, Kulaya said. Spending on infrastructure projects is expected at around 82.2 billion baht (RM10 billion) in the current fiscal year that began on October 1, up from 35 billion baht in the previous year, she said, adding that should help spur private investment. Sethaput Suthiwart-Narueput, an MPC member, however, told a separate seminar the government also had its limitations. "If there are things you (private investors) can do, just do it." – Reuters, October 28, 2015. See more at: http://www.themalaysianinsider.com/business/article/thailand-sees-policy-rate-rise-higher-gdp-next-year#sthash.m2GpQLjk.dpuf