A Bank of Ayudhya unit has indicated that political factors will have a major impact on the national economy this year. It said the quick formation of a new administration would be a boon for economic stability and investor confidence, while a scenario where a minority government takes office could significantly hamper said confidence.
Rung Sa-nguanrueang, senior director of planning at Bank of Ayudhya’s Global Markets Group, said she expected the Thai economy to expand by 3.3% this year. She also explained that political factors may positively as well as negatively influence the economy.
She noted that if the new administration is slow to take office or if a minority government is formed, this could be disruptive for economic stability and investor confidence. She added that this scenario has made the financial sector and businesses especially apprehensive this week.
Move Forward Party leader and prime ministerial candidate Pita Limjaroenrat vowed on Thursday (13 July) not to quit in his quest to become prime minister, after suffering defeat in a parliamentary vote fraught by abstentions and no-shows.
Speaking on the matter of interest rates, Rung said she expects the Bank of Thailand (BOT) to raise the policy rate one more time this year to bring it to 2.25%. She also said this would ensure economic stability while providing adequate room for monetary policy maneuvering to address economic volatilities that may arise.
The expected rate increase would also help the central bank deal with the risk of rising core inflation as a potential result of populist economic policies. This was despite core inflation now returning to a range deemed acceptable under the current fiscal policy framework.