MNI STATE OF PLAY:Thai CENBANK To Hold Rates As Options Narrow

Thailand's central bank meets this week with no change expected to record low interest rates but with ongoing questions over the currency and economic growth due to the pandemic and a slow vaccination rollout.

The Bank of Thailand's benchmark interest rate is expected to stay at 0.5% at Wednesday's meeting, with tourists still staying away due to the pandemic the economy is destined for a period of low growth. The BoT last cut rates in mid-2020.

The central bank holds its latest review on Wednesday, Aug. 4.

TARGETED MEASURES

With rates at a record low the BoT has limited options in terms of conventional monetary policy, and has turned to other more targeted measures such as the recent USD11.2 billion program of soft loans and a debt scheme to prop up businesses until tourists return as highlighted by MNI on July 2, MNI INSIGHT: Bank Of Thailand Sees Toolbox Emptying.

It has also looked to fiscal policy to do the heavy lifting.

Last week the BoT released data showing that private consumption remained weak, although exports had supported the economy as had public spending.

GROWTH AND INFLATION

Growth has fallen over the last five consecutive quarters and declined by 2.6% in the second quarter of this year. The BOT's current GDP growth forecast is for 1.8% this year and rising to 3.9% in 2022.

On a positive note, inflation has receded as an issue of concern with the headline figure declining in June

Of more concern is the Thai baht, which has fallen sharply since mid-June, and is now close to THB33 to the USD. The baht began the year at around 30 to the USD.

While positive for exports, the central bank is always concerned about currency volatility and is mindful that the baht is one of the worst performed currencies in Asia over 2021.