Today Bank of Thailand raised its key interest rate by 0.25% to 3.50%. This decision was already expected by economists after inflation reached 8.9% last month.
After raising fuel prices consumer confidence dropped in Thailand and Finance Minister Surapong Suebwonglee already acknowledged that Thailand may not reach its GDP growth target of 6% since higher oil and food prices are a major threat to growth. In the first quarter of 2008 the economy still grew at a rate of 6%.
The stock market continued to fall among concerns of higher interest rates and more protests against Prime Minister Samak Sundaravej government.
Today the National Statistics Office released the latest consumer price index (CPI) in Manila.
The year-on-year inflation jumped to 11.4% in June 2008 compared to 9.5% in May 2008. This is the highest inflation rate since May 1994 when inflation reached 11.5%. While the annual inflation rate rose to 9.2% in the National Capital Region (NCR), prices in Areas Outside the National Capital Region (AONCR) even accelerated by 12.3% in June 2008.
Excluding selected food and energy items, core inflation increased to 6.6% in June compared to 6.2% in May 2008. Prices for food, beverages and tobacco (FBT) rose by 16.5%, while services increased by 9.9% and fuel, light and water (FLW) increased by 7.6%
On June 5th, Bangko Sentral ng Pilipinas (BSP) raised its key interest rate by 25 basis points to curb inflation and to support the Philippine Peso, who lost more than 17% against the Euro and nearly 10% against the US Dollar.
On July 17th, the Philippine central bank, Bangko Sentral ng Pilipinas (BSP), will hold its next regular monetary policy meeting.
Today the Indonesian central bank, Bank Indonesia, increased again the key interest rate by 25 basis points to 8.75%. This was third rate increase after Bank Indonesia increased their rates to 8.25% in May 2008 and 8.50% in June 2008.
Bank Indonesia, headed by Governor Boediono wants to avoid second round price effects and hopes to keep inflation below 12.5% in 2008. On July 1st, the National Statistics Office reported that consumer prices rose by more than 11%, based on a new consumption pattern. Without this modification consumer prices would have risen by 12.8% in June 2008.
On August 5th, 2008 Bank Indonesia will hold its next regular monthly monetary policy meeting.
The International Monetary Fund (IMF) announced a new reduced GDP growth forecast for the Philippines. Now the IMF expects that the economy in the Philippines will grow by 5.2% in 2008, after they reduced their early forecast from 5.8%. Last week the IMF has finished its mission to the Philippines, which is confronted with higher inflation triggered by higher food and oil prices and a slowing global economy. Nevertheless the Philippine government still expects GDP to grow between 5.7% and 6.5%. Previous estimates even predicted up to 7% GDP growth.
In 2007 the economy grew by 7.2%, the highest rate in more than 30 years.
Since the beginning of 2008 most of the Asian governments had to cut their fuel subsidies because skyrocketing crude oil prices threatened their budget balance. As a result inflation rates increased to their highest level in may 2008. The central banks of India, Indonesia and the Philippines already raised their key interest rates this June and Malaysia and Thailand are expected to follow at their next central bank meetings.
At the moment the GDP is still growing at a respectable level but recent data already shows a remarkable decline in consumer confidence. With high inflation and further possible rate increases investors will have to find better places to invest their money than in the stock market.
| country |
GDP growth (YoY) |
inflation (may 08) |
key interest rate |
local currency vs EURa) |
| India |
8.8% |
7.9% |
8.00%1) |
-14.1% |
| Indonesia |
6.3% |
10.4% |
8.50%2) |
-4.1% |
| Malaysia |
7.1% |
3.8% |
3.50%3) |
-3.8% |
| Philippines |
5.2% |
9.6% |
5.25%4) |
-13.0% |
| Thailand |
6.0% |
7.6% |
3.25%5) |
-17.4% |
a) since 31.12.2007
1) On June 5th, 2008 Bank Indonesia raised its key interest rate by 25 basis points to 8.5%.
2) On June 4th, 2008 the Reserve Bank of India raised its key interest rate by 25 basis points to 8%.
3) On May 26th 2008 Bank Negara Malaysia kept its key interest rate unchanged (no change since April 2006)
4) On June 5th, 2008 Bangko Sentral ng Pilipinas raised its key interest rate by 25 basis points to 5.25%.
5) On May 21st, 2008 Bank of Thailand kept its interest rate unchanged (no change since August 2007)
