Bank of Thailand holds fire on rates, flags Omicron risk

Bank of Thailand holds fire on rates, flags Omicron risk

(Bangkok Post file photo)
(Bangkok Post file photo)

The Bank of Thailand (BoT) left its key interest rate unchanged at a record low for a 13th straight meeting on Wednesday, to support a tourism-reliant economy facing fresh risks from the spread of the Omicron coronavirus variant.

The BoT's Monetary Policy Committee unanimously voted to hold the one-day repurchase rate at 0.50%, as expected by all 22 economists in a Reuters poll.

While the BoT expected the Thai economy to continue to recover, it flagged the risk from the spread of the Omicron coronavirus variant.

"The spread of the Omicron variant would be a key risk to the economic outlook and therefore warranted close monitoring." the BoT said in a statement after its policy meeting.

After reopening more broadly to vaccinated foreign visitors last month, the country on Tuesday reinstated mandatory Covid-19 quarantine and scrapped a quarantine waiver on concerns over the Omicron variant.

Southeast Asia's second-largest economy contracted 1.1% in the September quarter from the previous quarter as it was battered by another Covid-19 wave, but recent data has pointed to some improvement as restrictions have eased.

The BoT slightly raised its 2021 economic growth forecast to 0.9% versus the 0.7% projected in September. But it slightly decreased its 2022 growth estimate to 3.4% from 3.9% previously.

The central bank delivered three cuts in the first half of 2020 to mitigate the impact of the coronavirus pandemic.

Last month, the finance minister said monetary policy must remain accommodative to underpin fiscal measures.

Unlike some major central banks across the globe, the BoT has the luxury of keeping monetary policy loose as inflation is still inside its 1%-3% target range. Headline inflation was at 2.71% in November.

The BoT expects headline inflation of 1.2% this year and 1.7% next year. It had previously forecast 2021 inflation at 1.0% and 2022 inflation at 1.4%.

The central bank forecast Thailand will receive 280,000 foreign tourists this year, and expected that to rise to 5.6 million in 2022. It expected an 18% increase in exports in 2021, up from a previous forecast of 16.5%.

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