Thailand Raises Key Interest Rate for Sixth Time in a Year

Yesterday, Thailand raised its interest rates for the sixth time in around a year in an effort to control inflation. The Bank of Thailand increased the benchmark one-day bond repurchase rate by one quarter of a percentage point to 2.75 percent.¬† With inflation in Thailand at a seven-month high, the country really couldn’t do anything else. They’re also expected to increase interest rates again several times in 2011, as inflation in the kingdom is likely to continue to increase.

The Thai baht too is rising too fast for many. With an increase against the dollar of over 7% in the last year, it’s damaging Thailand’s tourism industry and, if not held in check, could eventually have serious consequences on Thailand’s exports.

Economic growth in Thailand at the moment is on a rapidly increasing fast track and exports are up by a massive 30.9% in March. But, if the Thai baht continues to rise against the dollar, eventually Thai exports will be simply too expensive for many companies and individuals to buy, and that could be disastrous for companies relying on exports.

Currently, Thailand is expecting its economy in 2011 to expand by 4.2 percent, which is less than the 4.5 percent estimated previously. With Japan being one of Thailand’s biggest trading partners and now suffering problems after the earthquake last month, and with massive flooding in Thailand’s south affecting rubber and fruit exports, this expansion however could fall further. So things may not be as rosy¬† in Thailand as they look on first glance.