Bank of Thailand holds rate, cuts GDP forecast on Covid spike

Bank of Thailand holds rate, cuts GDP forecast on Covid spike

Monetary Policy Committee secretary and assistant governor of the Bank of Thailand Titanun Mallikamas (Photo: Bank of Thailand)
Monetary Policy Committee secretary and assistant governor of the Bank of Thailand Titanun Mallikamas (Photo: Bank of Thailand)

The Bank of Thailand (BoT) held its key interest rate unchanged and cut its economic forecast a day after lockdown-like measures were extended to more of the country, with two dissenting members saying rates should be lowered even further.

The BoT’s Monetary Policy Commitee voted four to two to hold the one-day repurchase rate at a record-low 0.5% for a 10th straight meeting Wednesday. The two dissenters called for a 25-basis point rate cut, the committee’s first split vote since May 2020.

The central bank also cut its 2021 gross domestic product forecast to 0.7% growth, just two months after lowering it to 1.8%. The Finance Ministry last week revised its own forecast to 1.3% growth, from the 2.3% it expected in April.

“This round of the pandemic will affect the economy both this year and next year. The impact is greater than what we have forecast and the downside risk remains significant,” Assistant Governor Titanun Mallikamas said in a briefing on Facebook Live. “The key mission for us is try to control the outbreak and speed up on vaccinations to revive confidence and boost economic activity.”

The decision comes after the government on Tuesday expanded quasi-lockdown measures to additional regions of the country, now covering about 40% of the population. The most stringent restrictions, which have been in place in Bangkok and some provinces since June 20, were extended to the end of August as the nation grapples with a surge in Covid cases fuelled by the delta variant.

The baht was down 0.1% at 33.071 to the dollar at 2.17pm local time, near its lowest level since April 2020. It’s down 9.5% against the dollar so far this year, the worst performer among Asian currencies tracked by Bloomberg. The benchmark SET Index dropped 0.3% when trade resumed after Wednesday’s lunch break.

Mr Titanun said government measures were needed to offset the blow from the latest virus wave. Fiscal policies should be targeted to fragile groups in Thai society, he said.

Virus Records

Thailand on Wednesday reported 20,200 new Covid-19 infections and 188 deaths, the highest daily figures for both. Total cases rose to 672,385, 96% of them since the latest wave began in April, official data show. The Health Ministry expects the outbreak to begin easing by October.

The country has administered about 17.5 million vaccine doses, enough to cover less than 13% of the population, according to the Bloomberg Covid-19 Vaccine Tracker.

The decision to keep rates unchanged “was not unanimous, and suggests that further rate cuts are a possibility given the weak growth outlook,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group in Singapore. “This will put further pressure on the baht, as the country is set to run further current-account deficits now that the opening to international tourists will likely be delayed further.”

Other points from the Bank of Thailand briefing:

  • The forecast for tourist arrivals was cut again to just 150,000 visitors this year -- assuming the pandemic is controlled by early in the fourth quarter -- and 6 million in 2022, compared to almost 40 million in 2019, pre-pandemic
  • If the outbreak lasts until the end of the fourth quarter, the BoT expects just 100,000 tourists this year and 2 million next year
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