Economy faces severe shocks, slow recovery - BoT

Economy faces severe shocks, slow recovery - BoT

Bank of Thailand governor Sethaput Suthiwartnarueput (Photo supplied)
Bank of Thailand governor Sethaput Suthiwartnarueput (Photo supplied)

The economy faces severe shocks from the coronavirus pandemic and a recovery is expected to take at least two years to get back to pre-pandemic levels, the new central bank governor said on Tuesday.

The economy, which is heavily reliant on trade and tourism, could shrink a record 7.8% this year, with tourism badly hit, the Bank of Thailand (BoT) has predicted.

Economic problems can be solved but it will take time as there are "no magic bullets", Governor Sethaput Suthiwartnarueput told his first briefing.

"The shocks are very severe, most notably on tourism," he said, adding the sector could lose 1.6 trillion baht, or 10% of GDP, with foreign arrivals expected at 6.7 million this year, compared to nearly 40 million in 2019.

But the country had a strong external position to withstand any shocks, said Mr Sethaput.

The economy, which suffered its worst contraction in 22 years in the June quarter, is expected to post some growth in the second quarter of next year, he said.

Mr Sethaput said the BoT would ensure that monetary policy and liquidity would not hinder the recovery.

"Our policy rate is the lowest in this region and a record low with limited room, so other measures, including fiscal ones, will have to play a major role," he said.

The BoT has cut the key rate three times this year to an all-time low of 0.50% to support the economy. It will next review policy on Nov 18, when analysts expect no change.

The BoT would consider more measures as appropriate but it was in no rush to introduce them and would not rule out unconventional policies, the governor said.

"All reasonable options are on the table," he said.

The central bank would encourage capital outflows to help ease the baht strength, Mr Sethaput said.

The BoT would closely monitor growing street protests which could affect confidence, consumption and tourism, he said.

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