2024-12-19
Bank of Thailand (BoT) ends 2024 with stability in focus. The Monetary Policy Committee unanimously decided to keep the policy rate at 2,25% at its last meeting of the year. A strategic choice that reflects the challenges and successes that marked the Thai economy during the year.
The surprise action in October: What happened?
In October 2024, the BoT delivered an unexpected rate cut, surprising analysts and markets. This cut was aimed at supporting domestic consumption and keeping the economy in balance in light of weak exports and an uncertain global economic environment. The reduction has partially succeeded in restoring consumer and investor confidence, but some sectors are still showing sluggishness.
What has worked in 2024?
- Consumption stimulus: After the interest rate cut, BoT reported increased activity in the retail trade and improved lending. Many households were able to renegotiate their loans to better terms.
- Tourism: The reopening of borders and new visa rules, which allow 60-day visa-free stays, gave a strong boost to the tourism industry. The contribution of this sector helped to stabilize the GDP.
- Improved currency: The Thai baht showed signs of strength against several major currencies, facilitating imports of essential goods.
Challenges and what didn't work
- The export brake: With global demand remaining weak throughout the year, Thailand's key sectors such as electronics and agricultural products were adversely affected.
- High indebtedness: Many SMEs struggled with high levels of debt, which limited their ability to invest despite lower interest rates.
- Regional competition: ASEAN countries such as Vietnam and Indonesia have attracted more FDI, placing Thailand in a tougher competitive situation.
Current state of the economy
The Thai economy has stabilized but is growing at a slower rate than previous forecasts. Inflationary pressure has decreased, which has created room for continued stimulus. A strong tourism sector and gradually increasing investments in green energy provide hope for the future.
Import and Export: 2023 vs. 2024
2023: A net import predominance characterized the year, driven by higher energy costs and a weak global export market.
2024: Exports fell further in the first half of the year but began to stabilize in the fourth quarter thanks to measures to diversify export markets and products.
Outlook For 2025
- Stability in the policy rate: Analysts expect the BoT to maintain a neutral policy until clearer signals of global economic recovery emerge.
- Tourist record: Forecasts indicate that Thailand could reach almost the same tourism levels as before the pandemic, which would have significant economic effects.
- Export recovery: With increased diversification of export markets, the export sector is expected to start contributing positively to GDP.
Conclusion
The Bank of Thailand's actions in 2024 have been a balancing act between supporting economic growth and keeping inflation under control. With a strong tourism sector and promising investments in new industries, 2025 could be a year when Thailand takes important steps forward. At the same time, structural challenges such as export dependence and regional competition remain.
Text: The editorial staff
Image license: geralt, Pixabay, original image