Thailand holds interest rates on brighter outlook

Thailand's central bank left its benchmark interest rate unchanged at 2.75 percent on Wednesday in the wake of data showing record economic growth in the fourth quarter of 2012.

The Bank of Thailand said the global economy had shown signs of improvement, while the Thai economy was supported by firm domestic demand and stimulus measures.

"The economy is expected to grow faster than previously projected in the periods ahead, with domestic demand being a key growth driver together with a gradual recovery of exports," said assistant governor Paiboon Kittisrikangwan.

"Inflationary pressure has risen somewhat, as a result of an increase in oil prices," he added.

The Bank last cut rates in October 2012 to help manufacturers.

Thailand suffered devastating floods in late 2011 which took a heavy toll on its lucrative manufacturing base, but its economy has since made a strong recovery.

Gross domestic product (GDP) soared at its fastest ever pace of 18.9 percent in the three months through December 2012 from the year-earlier period, government figures showed earlier this week.

The Bank of Thailand is likely to hold its key rate steady for the near future, said Sukhy Ubhi, an analyst with the London-based consultancy firm Capital Economics.

"Domestic demand will be supported by minimum wage hikes and a corporation tax cut at the start of 2013, while a pick-up in global growth should help Thailand's exports," he said.

But further ahead, "the global recovery is likely to falter and put rate cuts back onto the table", Ubhi added, predicting a quarter-point reduction in official Thai borrowing costs by the end of 2013.

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