The Bank of Thailand (BoT) is expected to lift its benchmark interest rate to 1.75 percent in the latter half of this year, especially if domestic indicators continue to point north amid rising inflationary pressures.

Thailand’s economy grew by 3.0 percent on a year-on-year basis (+0.4 percent q/q, on a seasonally adjusted basis) in 4Q16, bringing full-year growth to 3.2 percent, up from 2.8 percent seen in 2015. This was in line with official expectations for growth to print at a 3.2 percent clip, though slightly lower than market (and OCBC’s) expectation of 3.3 percent.

Importantly, NESDB’s growth estimate for the year ahead is penciled at a 3.0–4.0 percent, compared with BoT’s 3.2 percent made in December last year.

The engines of growth in 2016 remains to be tourist arrivals (accounting 10 percent of GDP), continued expansion in private consumption and investment, as well as accommodative monetary & fiscal policies. Exports growth also turned positive in 2016, suggesting that Thailand’s external environment may once again play its part in supporting overall GDP growth.

"Our outlook for growth to accelerate to 3.3–3.5 percent in 2017 remains unchanged. Elsewhere, given the low base seen in domestic prices last year amid some recovery in oil prices seen for some time now, we look for headline inflation to pick up to 1.5 percent in 2017 as well," OCBC Treasury Research said in its latest research report.