(Bloomberg) -- Thailand will likely extend its gradual monetary tightening cycle on Wednesday to prevent price pressures from building as tourism rebounds and politicians ramp up campaign spending before a national vote in May.

Bank of Thailand’s Monetary Policy Committee will probably raise the benchmark one-day repurchase rate by 25 basis points for a fifth straight meeting to 1.75%, according to 19 of 22 economists surveyed by Bloomberg. Three analysts expect BOT to pause after having already delivered 100 basis-point of increases since August.

Spending ahead of the May 14 general election is estimated to reach as much as 120 billion baht ($3.5 billion) as politicians try to woo Thailand’s 52 million voters, according to University of the Thai Chamber of Commerce President Thanavath Phonvichai. Funds spent on posters, food and logistics is helping boost demand in an economy already gaining momentum from the return of millions of foreign tourists.

Rising domestic activity and headline inflation that remains above target will probably convince the BOT to carry on with its gradual tightening even as neighbors Malaysia and Indonesia have paused while Vietnam has started to cut some interest rates. The rate-setting committee is also due to unveil its latest economic forecasts on March 29.

“MPC has made clear its gradual and measured rate normalization policy is in line with the nation’s economic growth and inflation,” said Thitima Chucherd, an economist at Bangkok-based Siam Commercial Bank, who expects the rate to peak at 2%. “So the rate hike will likely continue unless there are emerging shocks, which can derail the growth path.”

BOT has reassured that Thai banks are strong and face limited risks from the banking turmoil as their exposures to troubled institutions are low.

Here’s what to watch out for in BOT decision expected at 2 p.m. in Bangkok:

Economic Outlook

The central bank will release its latest gross domestic product forecast, which will take into account higher-than-expected tourist arrivals and slumping exports. BOT in November projected GDP growth of 3.7% this year and 3.9% next year.

The monetary authority in January revised the tourism outlook upward to 25.5 foreign visitors in 2023 and 34 million in 2024. Tourist arrivals reached 4.2 million in the first two months of the year.

The University of the Thai Chamber “will monitor the election outcome and the new government closely as it will be key for consumer confidence revival and also the whole economy,” Thanavath said.

Policy Guidance 

Market participants will also pay attention to signals on the rate path and also on how the panel voted, according to Han Teng Chua, an economist at DBS Bank, who expects a 25-basis-point hike on March 29.

Citigroup Inc. sees a quarter-point hike at this meeting and a pause in May, noting that a “non-unanimous vote is possible given easing inflation in recent months.” The September, November and January rate hikes were a unanimous decision unlike at the August and June meetings.

As price pressures ease and fourth-quarter growth disappointed, Capital Economics Ltd.’s Gareth Leather sees a hold on Wednesday. “Although a strong rebound in Chinese tourists will provide a boost, a combination of weak global demand for goods and higher interest rates mean the recovery is likely to underwhelm,” he said.

Despite the global financial turmoil in the past few weeks, the baht has held up. The Thai currency gained 3% against the dollar in the past month, the best performer in Southeast Asia.

©2023 Bloomberg L.P.