Kitiphong Thaichareon, Orathai Thairing

BANGKOK, (Reuters) – Thailand’s central banks left their key interest rates unchanged at a record low Wednesday. This supports a global pandemic-hit country that is facing risks.

While it reduced its outlook for growth in 2022, the company said that inflation would rise to above target this year and fall back to within its 1-3% target range next.

One-day repurchase rates were unanimously approved by the Bank of Thailand (BOT) Monetary Policy Committee. It is currently at 0.50% since May 2020. The rate was cut three times by the central bank in 2020.

In a Reuters poll, all 22 economists expected Wednesday’s decision.

BOT decreased its projections for economic growth in 2022 to 3.2% from December’s 3.4%, but increased its overall inflation forecast to 4.9% from its previous 1.7%. Now, the central bank predicts that inflation will fall to 1.7% by 2023.

The BOT stated that although sanctions against Russia have raised the cost of goods but will not affect the overall recovery process. This was in a statement released after the policy meeting.

The second-largest in Southeast Asia experienced 1.6% growth in 2017, which was one of the slowest rates in the region after 2020’s 6.2% contraction.

Although inflation reached an all-time high of 5.2% in February due to the Russia-Ukraine War-related rises in energy prices, economists warn that tightening policy is not likely soon as the recovery continues to be fragile. The vital tourism industry remains at risk.

Arkhom Termpittayapaisith, the Finance Minister, told Reuters Monday that higher inflation must be temporary and that interest rates need to remain low in order to help the recovery.

Following 428,000 visitors in 2021, BOT maintains its projection for foreign tourists at 5.8 million. This compares to 40 million tourists who visited the country in 2019, pre-pandemic 2019. Their spending was 11% of total GDP.

The BOT however raised its export growth forecast to 7.0%, up from the 3.5% it had previously predicted.