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Thailand's central bank sharply downgraded its growth forecasts Wednesday, as a faltering economy and a collapse in tourism numbers saw policymakers slash its 2021 outlook from 2.6% down to 1.8%, while the 2022 forecast was cut from 4.7% to 3.9%.
The Thai economic recovery will be "slower and more uneven than the previous forecast due to the third wave of the COVID-19 outbreak," the BoT said in a statement accompanying the June policy decision, where policymakers voted to leave the benchmark repurchase rate at a record low 0.5%.
"Downside risks to the economic outlook also remained significant from the new wave of the outbreak," the statement added, explaining the continued accommodative policy.
Although low rates are needed to stimulate the economy, the BoT remains on guard for downward pressure on the baht, which has declined around 9% against the USD since the beginning of 2020 and could decline further as the U.S. dollar rises on the shift to a more hawkish outlook by the U.S. Federal Reserve.
The combination of low growth and surging inflation in April is certainly frightening local commentators, but the BoT has said it believes the situation is manageable and that inflation will decline further later this year.
The central bank's recent response has been a USD11.2 billion program of soft loans and a debt scheme to prop up businesses until tourists return and that liquidity provision for firms in the real economy will likely remain the key policy tool in coming months.Another factor is inflation, with headline inflation increasing 3.41% year on year in April for the biggest jump in eight years before easing to 2.44% in May.
The Bank next meets on August 4.