Low interest rates, strong housing starts in 2018

The governor of Thailand’s central bank said he plans on keeping interest rates low next year in the absence of inflationary pressures as a builders association predicted housing starts would increase by a healthy 8 percent in 2018, just two of several positive indicators that Thailand’s accelerating economy will continue to pick up speed in the new year.

In addition, Prime Minister Prayut Chan-o-cha will provide more support for growth in the new innovation economy next year. His cabinet approved a one-year extension of a package of generous tax breaks for startups in 10-targeted industries the government has designated as priorities under Thailand 4.0, the 20-year national strategy designed to drive the economy and society to a more advanced level of development.

Thailand’s economy is expected by many to grow 3.9 percent when the final figures are tallied for 2017. Despite a faster than expected acceleration of the economy, inflation has remained low, allowing the Bank of Thailand Governor Veerathai Santiprabhob to continue to hold interest rates steady. The Bank of Thailand’s Monetary Policy Committee has held policy interest rate at 1.5 percent since April 2015.

Headline inflation over the past two months has been 0.99 percent, just below the bank’s target of 1 percent. Core inflation, which does not include food and energy prices, ran at 0.65 percent.

Exporters, however, have occasionally voiced concerns over the rising value of Thailand’s currency, the baht, fearing it will make their products less competitive in overseas markets.

However, exports have performed beyond expectations this year, assuaging the fears of many companies and economists.

“We’ve built up a sound buffer over the past few years and we’ve a stronger fundamentals than other emerging markets .”  Governor Veerathai Santiprabhob said.

The governor also said the economic recovery is not yet as broad based as he would like to see, and so he is reluctant to put any brake on growth at this time by raising rates.

Meanwhile, the Thai Home Builders Association said it expects the market for building new homes will grow by 8 percent in 2018 as the economy continues its steady improvement and more people are willing to invest in a home.

Sitthiporn Suwannasut, the association’s president, said he expects the new home market value will total $3.9 to $4.5 billion nationwide in 2018, up from $3.6 to $4.2 billion this year.

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