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Free AccessMNI STATE OF PLAY: Thai Rates on Hold As Growth Slows
Thailand's central bank downgraded its growth outlook on surging infection rates and a slow vaccine rollout but left its policy rate unchanged at a record low of 0.50% on Wednesday, maintaining policy settings for the eighth consecutive meeting, although stating the firepower it had left needed to be preserved for the future.
The Bank of Thailand's decision Wednesday was widely expected, as policymakers wrestle with the volatility of the baht --which has fallen around 4% this year after spiking higher in the fourth quarter of 2020 -- and a weakening economy.
SLOWDOWN
Economic growth "is likely to sharply slow due to the third COVID-19 wave," the BOT said, but offered no new growth forecasts, after earlier this year cutting its 2021 forecast to 3% GDP growth this year and 4.7% next year. The Finance Ministry last week cuts its 2021 GDP forecast 50 basis points to 2.3%.
With the pandemic returning to Thailand, the BOT now says it is unlikely that tourist numbers will reach three million this year. Prior to the pandemic, around 40 million tourists visit Thailand each year.
Also creating issues for the BOT is the weakness of the baht, which has fallen around 4% this year after a late surge by more than 5% in Q4 2020. The bank has a mandate to guard against currency volatility, but policymakers offered no explicit view in the statement, other than to say they will monitor forex markets.
Despite faltering growth, inflation is currently running at an annualised 3.4% -- above the BOT's target range of between 1% and 3%.
Taking both the currency and economy into account, the bank's Monetary Policy Committee "voted to maintain the policy rate at this meeting to preserve the limited policy space to act at the appropriate and most effective timing."
The central bank is looking at existing credit measures and debt restructuring to "reduce the financial burden in a more targeted manner." This was a better option currently, the BOT said, than cutting the policy rate, "which was already at a low level and remained supportive of economic recovery."
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