MACRO HOLIDAY 2024 “FROM MACRO THEORY TO THE REAL WORLD”

MACRO HOLIDAY 2024 “FROM MACRO THEORY TO THE REAL WORLD”

Thai Economy and the Role of Central Bank by Natthaphat Supphasetthasiri, Ph.D

The Bank of Thailand (BoT), as the central bank of Thailand, plays a crucial role in shaping the country’s monetary policy with the primary goals of maintaining price stability, supporting sustainable economic growth, and ensuring the financial system’s stability.

The Bank of Thailand (BoT) works with goals macroeconomic policies and responsible organizations

Four responsible organizations

1. The National Economic and Social Development Council (NESDC) focuses on Long-term development plans for the country

2. Ministry of Finance focuses on fiscal policy revenues and disbursement

3. Bureau of the Budget focuses on fiscal policy revenues and disbursement

4. The Bank of Thailand (BoT) focuses on monetary policy

Three goals macroeconomic

1. Stable and Sustainable economic growth

2. The standard of living of citizens

3. The Equitable income distribution

Because economic growth or GDP is insufficient for citizens, these four organisations strive to accomplish three macroeconomic goals.

The role of the Bank of Thailand.

The Bank of Thailand with regards to financial stability. First, the overview of price stability and macroeconomic stability is the main focus of monetary stability. Their goal is to lessen the fluctuations in currency rates. Second, a stable financial situation. Stability of financial institutions comes in third. These two factors regulate the financial system’s link, making BOT with the system measurable. As a result, they aim to meet all potential rates once peaks emerge. Finding resources and moving funds from the source to the borrower are primarily the responsibility of financial institutions.

The objective of Monetary policy in Thailand

1. Price Stability: The factors affecting price stability

   1.1 Inflation expectation depends on the consumer and the producer and how they expect the price in the future

   1.2 Demand-pull inflationary pressure from the external factor which made the increase in demand of the country.

   1.3 Supply-side inflationary pressures such as the price of transportation, exchange rate, wage, government policy

2. Sustainable Economic growth

3. Financial stability: Preserving financial stability involves close monitoring of imbalance within 7 key factors; external stability, financial markets, financial institutions, real estate sector, business, household, and fiscal.

The current monetary policy

Flexible inflation target + Managed-Float Exchange rate

Let’s say, The Bank of Thailand allows to floating of the exchange rate and manages it, but they don’t have the target range for the exchange rate. They only have the target range for the inflation rate. (The inflation target rate of the BOT is 1 to 3 ) This rate is considered from the flexibility. This depends on the situation, it’s not that bad if it is over than 1 to 3 or less because the Bank of Thailand will adjust the rate to 1 to 3

Latest Monetary Policy Decision

In the latest decision made by the MPC, the Committee voted 5 to 2 to maintain the policy rate at 2.5 percent. The Committee follows the uncertainties that might happen in the future with the cyclical and structural factors. For example, in the COVID-19 Crisis if we compare it with other countries Thailand is the one that recovers slowly. So if compared with the TOMYUMKUNG crisis in 1997, the crisis on COVID-19 is also slower recovering than.

Because the first factor is Tepid merchandise exports and manufacturing activity at the moment of 2022-2023, the globe PMI export order represents how the exports going are increasing. On another hand, the export value excl gold and the manufacturing production both decrease. The factors made these three rates increase or decrease because Thai export growth has been lagging behind competitors, Manufacturing for domestic sales could be outcompeted by imported goods, and Behavioural change among foreign tourists resulting in shorter stays, recorded in 2022 the foreigner stay in Thailand more than 10 days but in 2023 they spend less than 10 days. These gaps made the average spending per trip decrease as well. Second, Abnormally low tourist spending per trip despite tourist arrivals increasing as expected. In 2015-2019 in Thailand, we had the highest average for this rate around 105 index so in the full year 2023 start with the beginning was around 115 index, it’s the highest one from 2015 but at the least of the year the rate dropped to 90 index. Third, Unusually large fall in public investment due to the delayed budget so in 2023 Thailand got a delay on budget by around -33% compared with the past year just -14%. This rate is quite the strong rate that Thailand met.

The specific factors underlying GDP growth

• The difference between the expenditures side and the production side of GDP. The GDP able to measure 3 things is expenditure, production, income

• A level shift in the GDP last year led to a decrease in this year’s annual growth rate despite the momentum being unchanged.

The overall financial conditions are stable slowing credit largely owes debt repayment

• The interest rate increase in line with policy rate from recording the many bank interest rate are increasing higher than last few years from 2023

• The business loans largely owes to debt repayment from special loan measure during the COVID-19

From the recording pre,during,post COVID-19 the new loans are increasing and also the debt repayment increase.

World Economy in 2024..and onwards by Poonyawat Sreesing, Ph.D.

The globe economy in 2024: The global economy navigates a complex landscape characterized by diverse growth patterns, inflation dynamics, and monetary policy responses. Policymakers prioritize maintaining economic stability, managing inflationary risks, and fostering inclusive and sustainable growth amid ongoing challenges and uncertainties. All of these are come with risk. so in real world we have many categories the economic risk such as politics and geopolitical in China-india dispute or Economy and Finance in China economy could slow down from economic structural issues. or societal in impacts from climate change and EL Nino.

The global growth economy in the next few years.

From the economic survey people believe that next few years the economic will be weaker. But on the survey not everywhere are weaker it’s happen just one the Europe zone is not have any stronger. The main reason made the growth economy grow slower than in the past. ( 4 concerns: Global economy, Geoeconomic fragmentation, extremes weather and generative AI)

US-China decoupling

The economic decoupling started to change global trade landscape. Record by SCB trace Map compared the import and export of each country in 2017 ( US import thing from China 21.90%, US export things to Canada 18.30% ). On another hand, the import and export of each country in 2022 ( US import thing from China 17.10%, US export things to Canada 17.20% ) And In the China side ( China import from US 8.40% and export to US 19%) in 2017. In 2022 ( China import from US 6.60% and export to US 16.20%). It’s measure that the country able to produce good or things by themselves.

The growth framework

Thailand could got the benefit from improvement in sustainable pillars and technology ecosystem. Let’s say the main 4 pillars is innovativeness, inclusiveness, Sustainbility and Resilence. if compare the rate of Thailand, upper-middle income, world average, hight-income. Every pillars quite good if compare with Thailand but Sustainability pillar is worth than other ( Lowest )

This article is part of an assignment for the module 751309 Macroeconomic Theories 2 Faculty of Economics, Chiang Mai University

The article is written by

Rujira you-em ( 641615085 )