Bank of Thailand cuts key rate by 25 bps in special meeting
published : 20 Mar 2020 at 22:19
updated: 21 Mar 2020 at 08:40
The Bank of Thailand cut its key interest rate by 25 basis points to a record low of 0.75% in a special meeting on Friday, it said in a statement.
The Monetary Policy Committee, in a special meeting, voted unanimously to lower the one-day repurchase rate in a back-to-back cut this year.
The rate cut was the fourth since August. Friday's special meeting was the first time since 2003.
"This will mitigate the impact on the economy and also reinforce fiscal measures already implemented and forthcoming," the BoT said in a statement.
That will also reduce the burden of interest on borrowers affected by the coronavirus outbreak and alleviate strains on liquidity in the financial markets, it said.
"The committee viewed that the Covid-19 outbreak in the period ahead would be more severe than previously expected and the situation would take some time before returning to normal. This would severely affect the Thai economy," it added.
The pandemic has roiled global financial markets, affecting liquidity and the functioning of Thai financial markets despite the overall stability of the financial system, it said.
The rate cut suggests the MPC is accepting that the Thai economy is entering a recession along with the global economy, said Amonthep Chawla, an economist at CIMB Thai.
Central banks around the world have slashed interest rates in the past few weeks and provided additional stimulus in some cases to try to help alleviate the threat to the global economy from the coronavirus pandemic.
Thailand on Friday reported 50 new coronavirus infections, taking its tally to 322. One person has died.
"We now see two further policy rate cuts of 25 bps each in Q2 and Q3, taking the rate to a record-low 0.25% at end-2020," said Tim Leelahaphan, an economist at Standard Chartered.
"Policy space is running out, and alternatives have not been communicated," he said.
The MPC will still meet to review policy on March 25, as scheduled, when it will also offer updated economic forecasts.
It is expected to slash its 2020 growth forecast from 2.8%. Some economists predict negative growth for Thailand this year.
Thailand is considered one of the economies most vulnerable to the virus in Southeast Asia due to its heavy reliance on Chinese tourists and China trade. Foreign receipts accounted for about 11% of Thailand's gross domestic product (GDP) last year.
Tourist numbers may fall by 25% this year as a result of the pandemic, the Tourism Authority of Thailand said.
Southeast Asia's second-largest economy expanded just 2.4% last year, the lowest in five years.