MNI STATE OF PLAY: Omicron Uncertainty Clouds Thai CB Outlook

Thailand's central bank has cited uncertainty on the impact of the Omicron variant on the economic recovery in its decision on Wednesday to leave its policy rate unchanged.

While upping its forecast for growth in 2021, the Bank of Thailand has revised its 2022 estimate marginally lower to 3.4%, while forecasting 2023 growth rebounding at 4.7%.

The BoT’s Monetary Policy Committee voted unanimously to keep the one-day repurchase rate unchanged at the record low of 0.50%, maintaining the setting for the 12^th consecutive meeting, see: MNI STATE OF PLAY: Recovery Uncertain As Thailand CB Meets.

“The committee assessed that the Omicron outbreak would affect the economy in early 2022,” the BoT statement said. “The impact could be more severe and prolonged than expected due to downside risks such as the severity of the outbreak and the strictness of corresponding containment measures.”

EARLIER VIEWS

The bank’s previous assessment that the economy had “bottomed out” and had entered a recovery phase has driven the recent outlook, helped by benign inflation, strong exports and a stable baht.

The baht has weakened in the last two weeks, however, to around 33.8 against the USD after beginning 2021 at just under 30.

In a speech last week, BOT Governor Sethaput Suthiwartnarueput said domestic considerations would dictate interest rate deliberations rather than external policies such as those of the U.S. Federal Reserve.

While exports are strong and industry has been boosted by a new USD900 million investment by the Ford Motor Company, household debt is high and remains an ongoing problem and puts demand at risk from rising rates.

Thailand has traditionally sourced just over 10% of its GDP from the tourism industry.

Where 40 million foreign tourists visited Thailand in 2019, the figure this year is expected to be under 400,000.