The Bank of Thailand (BoT) kept its benchmark rate on hold at 0.50% on Wednesday to preserve policy space amid heightened economic headwinds, but predicted a deeper GDP contraction of 8.1% for 2020.
The central bank's monetary policy committee (MPC) voted unanimously to leave the one-day repurchase rate untouched.
The BoT in March sharply downgraded its forecast of Thailand's full-year economic outlook to a 5.3% contraction.
The economy is heading for recession after shrinking 1.8% year-on-year in the first quarter, the steepest decline since 2011's fourth quarter, when the country was suffering the worst flooding in decades.
The central bank's latest economic forecast appears more pessimistic than that of the National Economic and Social Development Council, the state planning agency, which sees a contraction of 5-6% this year.
The central bank, however, raised its forecast for Thai economic growth next year to 5% from the 3% predicted in March, MPC secretary Titanun Mallikamas said.
Headline inflation is expected to be minus 1.7% this year before bouncing back to 0.9% next year, he said.
The MPC was concerned that the baht's strength against the US dollar could deal another blow to the country's economy. It would need to evaluate whether additional measures to curb the baht's value are need, he said.
