MNI STATE OF PLAY: Thai CB To Trim GDP View, But Policy Steady

The Bank of Thailand is set to further downgrade its expectations for growth when the Monetary Policy Committee meets Wednesday despite having already cut its 2021 GDP forecast to 3.2% although benchmark rates will hold steady as policymakers have little room - or inclination - to cut them further from the record low 0.5%.

With tourism stalled and a resurgence in the pandemic being controlled slowly, the growth outlook for this year is now expected to be trimmed to the upper 2% range.

The BOT cut rates by 75 basis points in the immediate aftermath of the covid outbreak last year, but has left settings unchanged since May 2020. In February, the bank stated that with rates close to the effective lower bound, any remaining conventional policy space would be used with the "most effective timing".

Since May the BOT has been largely focused on liquidity in the corporate sector through a USD12 billion corporate bond stabilization fund.

The central bank has also been in discussions with the government on a potential asset warehousing program whereby commercial banks can freeze non-performing assets from the hard hit tourism sector. More details on the program may come on Wednesday, but official backing is still required and legislation would need to be amended.

CURRENCY

The Thai baht has weakened in recent weeks and is only slightly stronger than the level of 32 to the USD, which is considered ideal for Thai exporters. A move lower against the Chinese yuan will be particularly welcomed by policymakers.

The BOT was unmoved by the baht's appreciation and actually saw an upside to its strength, advocating that Thai businesses use it as an opportunity to ramp up investment and expenditure on capital goods.