The new lower policy rate will be good for exports since it will help to curb the baht's rise, making exports more competitive, says Deputy Prime Minister MR Pridiyathorn Devakula.
He was speaking on Thursday on the sidelines of a forum entitled "Reform for the Future", hosted by Hong Kong-based CLSA Ltd.
Pridiyathorn: Signs of improvement seen
On Wednesday, the Bank of Thailand's Monetary Policy Committee (MPC) unexpectedly voted to cut the policy interest rate by 25 basis points to 1.75% from 2%, its first rate change in a year, hoping to gain economic traction amid weakening growth prospects and restore both consumer and private sector confidence.
The rate cut came after the MPC estimated this year's growth would not reach its 4% forecast.
The MPC believed Thailand's economic recovery had been slower than expected, headline inflation would remain low in the near future and fiscal stimulus would take time to bear results.
But MR Pridiyathorn said the economy was still expected to grow by 4% this year after only 0.7% growth last year "The Thai economy is showing signs of recovery as reflected in higher value-added tax collection in February," MR Pridiyathorn said.
"The government expects private consumption will strongly recover in May."
He said private investment also showed signs of improvement, with several new factories starting up and creating new employment.
The government's budget disbursement should also become more efficient once the government improves the approval process.
MR Pridiyathorn said the government's budget disbursement and infrastructure spending along with private consumption would play a pivotal role in driving the economy this year.
Earlier, he said the government's budget disbursement and spending were expected to run at full throttle by the second quarter.
As of Feb 27, a total of 1.1 trillion baht or 42.7% of the 2.575-trillion-baht budget for fiscal 2015 had been disbursed.
Disbursement of the regular budget totalled 1.01 trillion baht or 47.5% of the total of 2.125 trillion.
Of the investment budget, only 80.5 billion baht or 17.9% of the total of 449 billion had been disbursed.
The budget for fiscal 2015, which began last Oct 1, is up by 2% from fiscal 2014.
Disbursement of the investment budget is estimated to reach 30% this month after the government improves the approval process.
MR Pridiyathorn said the government was now accelerating several key tasks including development of the digital economy.
The digital economy committee is scheduled to hold its first meeting next Wednesday to decide on the creation of a national broadband infrastructure, auctioning of a spectrum to provide fourth-generation wireless broadband service, establishing a national government data centre and increasing the number of international internet gateway facilities.
In a related development, Nopporn Thepsittha, president of the Thai National Shippers' Council, said Thailand was expected to face a spate of challenges, particularly in the first half of this year.
Shipments are forecast to suffer a contraction of 2% year-on-year in the first quarter after negative signs in January, with prospects for flat export growth in the first half.
January exports contracted by 3.46% year-on-year to US$17.2 billion, the biggest fall since last August.
In baht terms, the value contracted by 2.34% to 563 billion baht.
Last December, exports rose by 1.9% year-on-year to $18.8 billion, but that was not large enough for full-year shipments to escape contraction.
Figures showed a full-year decline of 0.41% to $228 billion, the second straight year exports fell after a 0.3% dip in 2013.