Bank of Thailand expected to hold fire on rates, cut GDP outlook
published : 21 Jun 2021 at 17:48
The central bank is expected to keep its key interest rate at a record low but will likely cut its economic growth outlook on Wednesday, as Thailand battles a third wave of Covid-19 infections, a Reuters poll showed.
The Bank of Thailand's (BoT) current 2021 GDP growth forecast is 3.0% and it had said in May growth could come in between 1% to 2% this year, depending on the country's vaccine rollout. The mass vaccination drive that began earlier this month has been hampered by limited vaccine supply and organisational confusion.
The latest and biggest outbreak so far has slowed an economic recovery and the state planning agency last month slashed its GDP growth forecast this year to 1.5%-2.5% from 2.5%-3.5%.
The BoT said last month the key rate might stay at the current level for one or two years.
At its last meeting, the BoT said monetary policy would remain accommodative and the limited policy room should be preserved to be used at the most effective time.
With the BoT's limited policy ammunition, all 22 economists surveyed expect the Monetary Policy Committee to hold its one-day repurchase rate at an all-time low of 0.50% this week, with several seeing no policy change throughout 2022.
The central bank has kept the policy rate unchanged after three cuts in the first half of 2020, easing the effects of the pandemic on the economy.
BoT Governor Sethaput Suthiwartnarueput has said the rate is low and liquidity is not an issue. Rather, the BoT has assisted with debt relief measures and soft loans, and analysts expect it to introduce more.
The government will also borrow a further 500 billion baht to help the economy while trying to resolve household debt.
Given the recent government mandate to tackle household debt, "we can expect to see at least some guidance and possibly moves to lower the interest rate ceilings on consumer credits," said Kobsidthi Silpachai, head of capital markets research at Kasikornbank.
Phacharaphot Nuntramas, economist at Krung Thai Bank, said rather than cutting its policy rate, the BoT might reduce banks' fees paid to the Financial Institutions Development Fund, so they can help borrowers by further reducing their loan rates.