Analysts expecting rate cuts to be delayed
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Analysts expecting rate cuts to be delayed

Following better-than-expected GDP growth in the first quarter, research houses are predicting that the Bank of Thailand will delay any policy rate cut until the end of this year or next year.

Burin Adulwattana, managing director at Kasikorn Research Center (K-Research), said the National Economic and Social Development Council (NESDC) on Monday announced year-on-year GDP growth of 1.5% for the first quarter, surpassing expectations. K-Research had projected growth of between 0.6-0.8%.

"Given the brighter-than-forecast [Thai] economy, we expect the central bank to maintain its policy rate at the current level through the end of this year," Mr Burin said.

K-Research recently anticipated that the central bank's Monetary Policy Committee would begin cutting the policy rate in the second half of the year from the existing level of 2.5%.

At the same time, the research house trimmed its 2024 GDP growth forecast to 2.6%, from its earlier forecast of 2.8%, in accordance with the NESDC's latest economic data.

Separately, Amonthep Chawla, chief economist at CIMB Thai Bank (CIMBT), estimated first-quarter growth of 0.8%, below the NESDC's figure.

CIMBT now expects the central bank to delay the policy rate cut until December, with only a single 25-basis-point reduction this year, down from an earlier forecast of two cuts.

Mr Amonthep added that local banks' six-month reduction of the minimum retail interest rate (MRR) would help ease the debt repayment burden for vulnerable customers amid an uneven economic recovery. This MRR reduction is another factor contributing to the delayed policy rate cut, he noted.

CIMBT may also revise up its 2024 GDP growth forecast from the current 2.3%, depending on economic developments and public spending following the fiscal budget disbursement, Mr Amonthep said.

The NESDC now expects GDP growth of between 2% and 3% for 2024, slightly lower than its previous forecast of 2.2% to 3.2%. Last year's growth was 1.9%.

The downgrade is due to a high level of external risk, especially trade protectionism that is intensifying, geopolitical conflicts, and volatility in the global economy.

Meanwhile, Thitima Chucherd, head of economic and financial market research at SCB EIC, a research centre under Siam Commercial Bank, said their research suggests the central bank will delay its policy rate cut until December. It previously expected a cut to take place in April or June. The revision was made due to the better-than-anticipated first-quarter GDP growth.

Additionally, SCB EIC may lower its 2024 GDP growth forecast from the current 2.7% to reflect the NESDC's latest data.

SCB EIC estimated first-quarter growth below 1%, which is lower than the NESDC's estimate of 1.5%, Ms Thitima said.

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