The Bank of Thailand (BoT) left its key interest rate unchanged at a record low for a second straight meeting on Wednesday, as widely expected, on signs of improvement in the economy after the easing of measures to contain the coronavirus outbreak.
The BoT’s Monetary Policy Committee (MPC) voted unanimously to keep the one-day repurchase rate steady at a record low of 0.50%, after having cut it three times this year to help mitigate the impact of the pandemic on tourism and domestic consumption.
The economy is forecast to contract the most on record this year, shrinking 8.1%, with any recovery taking as long as almost two years, according to outgoing central bank Governor Veerathai Santiprabhob. The economic damage could reach as much as 3 trillion baht because of the hit to Thailand’s growth drivers, tourism and exports.
With the policy rate hovering close to zero, the central bank is running out of conventional monetary policy space to spur the economy and boost prices as deflation sets in. The bank has said it’s studying options like large-scale asset purchases and some form of yield-curve control.
At the same time, authorities are worried about the currency’s gains, which threaten to undermine any recovery in exports. The baht has gained more than 4% against the dollar in the past three months, the best performer in Asian currencies tracked by Bloomberg.
The country is in the middle of installing a new economic team, including a new central bank governor and finance minister. Sethaput Suthiwart-Narueput, a member of the BoT’s Monetary Policy Committee, was named last week as a successor to Mr Veerathai, who will leave his job after his term expires in September.
While Thailand has had relative success in containing the virus outbreak, the government has extended the country’s state of emergency for a fourth time, by one month through Aug 31, to prevent a second wave of infections.