29/04/2026

BIZ & FINANCE WEDNESDAY | APR 29, 2026

17

BOJ keeps rates steady but split signals June hike

Thailand projects lower growth, fewer tourists due to Mideast war

BANGKOK: Thailand’s economic growth and tourist arrivals are forecast to drop this year as the Middle East war roils global energy prices, the finance ministry said yesterday. The country’s gross domestic product growth is projected to dip to 1.6%, the ministry said in a statement, down from 2.4% in 2025. Exports, a key driver of Thai growth, are now expected to rise 6.2% this year, compared with a 1% rise projected in January, Vinit Visessuva napoom, head of the finance ministry’s fiscal policy office, told a press briefing. Growth in the Southeast Asian nation is anaemic, with the tourism sector vital but arrivals yet to return to their pre-Covid highs. The government said in February that this year’s growth forecast was between 1.5% and 2.5%. The country’s core inflation was forecast to hit 3% this year, up from an earlier estimate of 0.3%. Private investment is projected to rise 3.2% this year, while government investment is seen rising 1.7%, the ministry said, adding that private consumption was expected to rise 2.3% this year. Growth forecasts factor in government support measures, including a consumer subsidy scheme, Vinit said. Thailand expects about 33.5 million foreign tourists this year, about two million fewer than previously estimated. It received nearly 33 million foreign visitors in total last year. Tourists from Europe and the Middle East have declined as a result of the US-Israeli war against Iran, the ministry added. Visitors from the Middle East fell by a third in March compared to the same month last year, and European arrivals dropped around 4%t, while tourists from other Asian nations rose 6%, according to Thai tourism ministry figures. – AFP, Reuters Eurozone faces higher inflation and tighter credit, surveys show FRANKFURT: Eurozone consumers sharply raised their inflation expectations and banks tightened access to credit in the wake of the Iran war, polls showed yesterday, illustrating the early impact of a surge in energy costs. The European Central Bank’s (ECB) Consumer Expectations Survey showed inflation ex pectations for one year ahead jumped to 4% in March from 2.5% a month earlier while bets for three years out rose to 3% from 2.5%. The central bank’s quarterly Bank Lending Survey indicated lenders had tightened their criteria to approve loans by more than expected in the three months to March and expected to continue doing so this quarter. The surveys put eurozone rate-setters in a difficult position: on the one hand rising inflation expectations would call for interest rate hikes, on the other financing conditions are already worsening even before any ECB move. ECB policymakers are expected to keep interest rates on hold when they meet tomorrow as they await more evidence about the duration and extent of the energy-induced inflation shock, but hikes are expected to be on the table by their next decision in June. They may take some comfort in consumers’ inflation expectations for five years ahead, which only moved to 2.4% from 2.3%. And banks were already doing some of the ECB’s work for it by making credit harder to get, particularly for firms which saw the sharpest tightening since the third quarter of 2023. “Perceived risks to the economic outlook and a lower risk tolerance of banks were the main contributing factors, with banks indicating ... that geopolitical and energy developments exerted tightening pressure,” the ECB said. “Some banks reported additional tightening related to exposures to energy-intensive firms and to the Middle East,“ it added. – Reuters

The world’s second-largest economy grew 5% in the first quarter, at the top of its full-year target range of 4.5% to 5%, showing higher resilience than many other countries to the conflict, thanks in part to ample oil reserves and a diversified energy mix. Still, soaring energy and raw materials prices threaten to drive up production costs and squeeze already thin margins at factories that employ hundreds of millions of people. And a wobbling global economy could slow demand for Chinese exports. The Politburo, a top decision-making body of the ruling Communist Party, was cited as saying by state news agency Xinhua that the economy got off to a better-than-expected start this year. But it added: “We must systematically respond to external shocks and challenges, improve energy resource security guarantee levels and counter various uncertainties with the certainty of high-quality development.” TOKYO: The Bank of Japan (BOJ) kept interest rates steady yesterday but three of its nine member board proposed increasing borrowing costs, signalling policymakers’ concerns over inflationary pressures from the Middle East conflict. The central bank also sharply revised up its price forecasts and stressed vigilance to the risk of an inflation overshoot, signalling a strong chance of a rate hike in coming months. “While the BOJ kept rates on hold, the three dissenting votes highlight the tensions monetary officials face,” Fred Neumann, chief Asia economist at HSBC in Hong Kong, said, noting energy shocks were fanning inflation and curtailing growth. “Given elevated inflation expectations in Japan, which have increased further due to the energy crisis, the BOJ will need to raise interest rates in due course to prevent price pressures from building further,” he said. As widely expected, the BOJ left unchanged its short-term policy rate at 0.75% in a two-day meeting that ended yesterday. In a surprise move, however, three bank board members dissented and instead called for a rate hike to 1%. Naoki Tamura and Junko Nakagawa joined Hajime Takata, who unsuccessfully made a solo proposal to increase in March. It was the biggest number of dissents the board has seen since January 2016, when the BOJ adopted negative interest rates by a narrow 5-4 vote. The yen rose after the policy announcement, as investors priced in the chance of a rate hike as soon as the central bank’s next meeting in June. BOJ governor Kazuo Ueda said the central increase to 1%, board upgrades inflation and lowers growth forecasts o Three dissenters unsuccessfully propose

Ueda (centre) and other board officials attending the monetary policy meeting at the Bank of Japan headquarters in Tokyo yesterday. – AFPPIC

sector, safeguard the job market and curb industrial overcapacity – policies that would reduce deep supply-and-demand imbalances in the economy. But these were mentioned lower in the statement, suggesting Beijing prioritises industrial and technological dominance over other policy goals. “The Politburo remains committed to high quality development and to making better use of domestic resources to achieve high-tech growth,” said Marco Sun, chief financial markets analyst at MUFG Bank. Analysts say ample oil reserves, heavy use of coal and high adoption of solar, wind and electric vehicles have given China better chances of weathering the closure of the Strait of Hormuz than many European or Asian economies. But China is not immune to the fallout from the conflict. Shipments grew just 2.5% last month, slowing sharply from 21.8% in the January to February period. Higher input costs showed up in the March inflation data, as factory gate prices rose out of deflation for the first time in more than three years, without any evidence of a rebound in consumption. – Reuters “Given that underlying inflation has been approaching 2% and real interest rates are at significantly low levels, the BOJ will continue to raise its policy rate in response to developments in the economy, prices and financial conditions,” the BOJ said. The BOJ said it expected consumer prices to rise 2.8% in the current fiscal year, compared with the 1.9% previously forecast, while it lifted the next year’s outlook to 2.3% from 2.0%. The increase for consumer inflation, except fresh food, is “significantly higher” and for fiscal 2027 “somewhat higher, reflecting the effects of the rise in crude oil prices”, it said. It also slashed its fiscal 2026 growth forecast to 0.5% from 1.0%, and for next year trimmed its projection to 0.7% from 0.8%. – Reuters, AFP

The meeting’s readout “shows that the government is aware of the difficulties and challenges the economy faces,” said Zhiwei Zhang, chief economist at Pinpoint Asset Management. “Economic momentum will likely slow in the second quarter due to the uncertain external environment and high energy prices.” The Politburo said it was “necessary to accelerate the construction of a modern industrial system” promote artificial intelligence adoption throughout the economy, seek “scientific and technological self-reliance” as well as greater control of supply chains. In the latest five-year roadmap announced in March, China has framed technological dominance and localised supply chains as core national security goals, disappointing those who have been calling on Beijing to rebalance its economy towards consumption and contribute more to global demand. In line with past policy documents, the Politburo also gave a nod to the need to boost consumption, stabilise the struggling property bank decided to stand pat for now to spend more time gauging the fallout from the conflict, and to look through what it still considered to be a temporary, supply-shock driven inflation. The US-Israeli war with Iran has complicated the BOJ’s efforts to raise still-low interest rates gradually to levels deemed neutral to the economy, seen by markets at around 1.5%. Nearly two-thirds of economists polled by Reuters expect the BOJ to raise its benchmark rate to 1% by end-June. In a quarterly outlook report, the central bank sharply revised up its core inflation forecasts for the fiscal years ending March 2027 and March 2028. The BOJ also tweaked its policy guidance to allow itself more flexibility in timing further rate hikes.

China prioritises energy security, tech edge BEIJING: China’s top leadership yesterday pledged to strengthen the country’s energy security while pursuing rapid technological development and greater self-sufficiency, as the economy is beginning to be affected by the US-Israeli war on Iran. The phrase “high-quality development” refers to the pursuit of scientific and technological progress with the goal of moving China higher on the value-added ladder.