Thai central bank stands pat, keeps 2016 growth forecast at 3.1pc

BANGKOK: Thailand's central bank kept its key interest rate unchanged on Wednesday, as expected, saying the current monetary policy still supports economic recovery and the economy should still grow as forecast.

The Bank of Thailand's Monetary Policy Committee (MPC) voted 6-0 to leave the one-day repurchase rate at 1.50 percent, where it has been since April 2015.

"The economy would continue to recover, and inflation would return to the target band within the latter half of the year as previously expected," the MPC said in a statement.

"Meanwhile, monetary conditions remained accommodative and conducive to the economic recovery. Hence, the policy rate should be kept on hold at this meeting."

All 27 economists polled by Reuters had predicted no policy change.

The BOT maintained its 2016 economic growth forecast of 3.1 percent, as set three months ago. But it said exports this year will decline 2.5 percent, rather than fall 2 percent.

Last year's GDP growth was 2.8 percent. Thai exports, traditionally a growth driver, have declined the past three years.

Krystal Tan of Capital Economics said a rate cut cannot be completely ruled out, and an August referendum on a new constitution could be a rigger but "the economy at the moment actually looks stronger than it has done for a while."

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Charnon Boonnuch, economist at Tisco Securities, said "We think the Thai economy is bottoming out, although headwinds will continue to drag."

The committee said government spending and tourism would continue to drive the economy while limited monetary policy space should be preserved given that "the Thai economy would still be facing risks going forward."

Benign headline consumer prices, despite recent modest rises, give the BOT leeway to keep the rate low and reduce the need for further easing.

Thailand's junta has struggled to turnaround Southeast Asia's second-largest economy as exports have long been weak and domestic demand has been restrained by high household debt, low farms prices and drought.

Tourism, accounting for 10 percent of Thai GDP, has been a rare bright spot for Southeast Asia's second-largest economy.

In a bid to spur growth, the junta has introduced stimulus measures and ramped up investment plans, although big infrastructure projects have been slow to get under way.

Domestic auto sales grew nearly 16 percent in May on-year, their highest growth in three years, helped by government stimulus measures and investment projects.