BoT mulls revision of GDP forecast

BoT mulls revision of GDP forecast

Delta variant spread requires monitoring

People receive Covid-19 vaccinations at Central Festival Eastville. Varuth Hirunyatheb
People receive Covid-19 vaccinations at Central Festival Eastville. Varuth Hirunyatheb

The Bank of Thailand (BoT)'s view is that the government's latest lockdown measures will lead to higher downside risks for the Thai economy amid the spread of the Delta variant of Covid-19, which is fuelling the latest wave of infections.

The government's new round of tighter lockdown measures and travel curbs reflect a higher downside risk of the country's economic outlook. The BoT's economic forecast under the baseline scenario reported on June 22 will be revised as the Covid-19 outbreak has been prolonged longer than the existing assessment, the central bank's senior director for economic and policy department, Chayawadee Chai-Anant, said in an analyst meeting on Monday.

However, the central bank needs to monitor the situation of the spread of the Delta variant, number of infections, and the government's additional measures -- both restrictions and subsidies -- before assessing the economic outlook again.

The government has implemented tough measures, including a curfew in Bangkok and its five adjacent provinces in addition to discouraging cross-provincial travel for at least 14 days, effective as of Monday.

"The Delta variant and high number of cases could delay herd immunity, the country's reopening target, and economic recovery. So, it's possible that the BoT will miss the existing GDP forecast under baseline scenario," Ms Chayawadee said.

Last month, the central bank's Monetary Policy Committee (MPC) met to discuss the impact of the Delta variant but at that time the number of cases was lower. At that time, the central bank also cut its 2021 gross domestic product (GDP) growth projection for Thailand from 3% previously to 1.8% due to the impact of the third wave.

The senior director of the BoT's monetary policy department, Sakkapop Panyanukul, said the central bank is ready to implement additional monetary measures to recover the economy and help borrowers where necessary. Under the current fiscal and monetary policies, the Finance Ministry and the BoT are mainly focusing on supporting borrowers' liquidity and reducing the existing debt burden through targeted measures.

Liquidity injection for small and medium-sized enterprises (SMEs) through the central bank's amended-soft loan scheme has been progressing at a steady pace. As of July 5, 66.89 billion baht of loan approvals have been offered to 21,929 entrepreneurs or 3.1 million baht of average credit line per borrower.

He said the soft loan approvals are expected to reach 100 billion baht in the first six months after the central bank implemented the amended-soft loan scheme since April 26 this year. Meanwhile, liquidity support is being accessed by the central bank's target group of small entrepreneurs who are vulnerable and feeling the impact of the pandemic.

However, another financial-aid scheme -- asset warehousing -- which is also being offered to business operators has not seen many participants but the situation is expected to improve later. Borrowers are waiting for a formal conclusion by related state authorities about the scheme's fee waiver on asset transfers, which is expected to come out soon.

There are several deals under the asset warehousing scheme in the pipeline worth around 10 billion baht. So, it should provide significant progress in the debt assistance scheme after the fee waiver regulations are formally concluded. Currently, two business operators with a total credit line of 900 million baht have joined the scheme.

In addition, Mr Sakkapop said the BoT has been considering a ceiling rate cut for unsecured loan products in response to Prime Minister Prayut Chan-o-cha's demand to ease financial burden of borrowers and to curb the country's household debt.

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