The International Monetary Fund said Thailand should be ready to increase interest rates and exit fiscal stimulus when the recovery strengthens.
“Directors agreed that the current expansionary fiscal and monetary stances are appropriate in the context of weak world demand and muted inflationary pressures,” the IMF said in an e- mailed statement today following an April 27 meeting on Thailand.
“The authorities should unwind the supportive policy stance as the recovery takes hold and move to a medium-term consolidation path consistent with low inflation and fiscal sustainability.”
The Bank of Thailand has kept its benchmark rate unchanged at its past two meetings, resisting pressure from the government to resume cuts in borrowing costs to help businesses recover from floods that swamped thousands of factories in the fourth quarter of last year. While inflation slowed in April to the lowest in more than two years, rising wage and oil costs are reviving price pressures.
The IMF expects Thailand’s growth to accelerate to 5.5 percent this year from 0.1 percent in 2011. It sees “significant risks” to the outlook as the country remains vulnerable to contagion from the European debt turmoil, weak growth in trading partners and domestic political tensions, “if they were to be renewed.”
To contact the reporters on this story: Sandrine Rastello in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Chris Wellisz at email@example.com