VIEW: UOB Believe BoT On Hold, First Rate Cut Early 2024

The Bank of Thailand (BoT) increased rate 25bp to 2%, as was widely expected, and remained optimistic regarding the growth outlook. While it didn’t signal the end of its tightening cycle, UOB believe that it will now hold rates at 2% for the rest of the year with the first rate cut coming in early 2024.

• “We revised our view that BOT has reached its terminal rate of 2.00% and will keep it at the current level for the rest of this year. We also keep our forecast for the rate cut to start in the early part of 2024 as growth momentum may stall while inflation is coming back steadily to BOT’s target range of 1-3%”
• “BOT is more confident of stronger growth momentum ahead, of which we are less sanguine of. BOT forecasted the Thai economy to grow at 3.6% in 2023 and further accelerate to 3.8% in 2024. Full year inflation is projected to return to its 1-3% target range this year and next at 2.5% and 2.4% respectively.”
• “The less than sanguine view of ours also stems from the fact that given a more sluggish return of tourists spending, domestic trade activities have not meaningfully picking up pace, unlike during the initial phase of Thai reopening. Finally, given our ongoing expectations of a more sluggish global growth, we pare back our expectation of strong goods and services exports, which mean that consistent with our GDP forecast of 3.1% this year, we are much less sanguine compared to BOT’s view.”