The Bank of Thailand (BoT) kept its benchmark interest rate unchanged for a fifth straight meeting to preserve its limited policy space, while reiterating concerns about a currency rally and lowering its economic growth forecast for next year.
The central bank held the policy rate Wednesday at 0.5% in a unanimous decision, after cutting by a total of 75 basis points earlier this year. Sixteen of 17 economists in a Bloomberg survey predicted the hold, with one expecting a 25-basis point cut.
With a debt holiday over and asset quality concerns, the BoT might cut the rate in the next quarter, said Kobsidthi Silpachai, head of capital markets research at Kasikornbank.
"While there is light at the end of the tunnel, we remain inside the tunnel," he said.
The Covid-19 pandemic has devastated two of Thailand’s main growth drivers, tourism and trade. The government has responded with a series of stimulus measures, recently approving an additional $1.4 billion expenditure for the first quarter of 2021. A fresh virus outbreak over the weekend has added a new risk to the fragile recovery.
Strength in the baht has emerged as a key concern as the government seeks to support exports. The baht has rallied more than 9% from this year’s low in April.
Seeking to stem baht gains, the central bank has issued a variety of measures to boost capital outflows, and its dollar purchases pushed foreign reserves to a record $255.8 billion in the week ended Dec 11. Thailand recently was added to a US Treasury Department monitoring list over its foreign-exchange intervention.
The central bank on Wednesday revised up its growth forecast for 2020, predicting a 6.6% contraction compared with a previous projection of a 7.8% decline. It cut next year’s forecast to 3.2% growth, from 3.6% previously, due to sluggish tourism.
It now expects 5.5 million foreign tourists next year, rather than the 9 million projected previously. That compares with nearly 40 million visitors in 2019.