Thai central bank avoids further stimulus, upgrades 2020 GDP forecast

BANGKOK: Thailand's central bank left its key interest rate unchanged at a record low on Wednesday and upgraded its GDP outlook slightly as Southeast Asia's second-largest economy showed some signs of recovery from the coronavirus jolt.

The bank said private consumption and investment were likely to improve, but it expected a record contraction in gross domestic product this year, with the economy taking at least two years to return to pre-pandemic levels as the key tourism industry reels from a ban on foreign visitors.

The Bank of Thailand's (BOT) monetary policy committee voted unanimously to keep the one-day repurchase rate steady at an all-time low of 0.50pc for a third straight meeting, as was widely expected.

"The committee viewed that the extra accommodative monetary policy since the beginning of the year as well as fiscal, financial, and credit measures additionally announced, helped alleviate adverse impacts and would support the economic recovery after the pandemic subsided," it said in a statement.

Phacharaphot Nuntramas, an economist with Krung Thai Bank who predicts a contraction of 8.8pc this year, said, "It's a surprise that their outlook was better this year. We don't know what signs the BOT saw."

While the bank raised its 2020, GDP forecast, it still expects the economy to shrink by a record 7.8pc in 2020, versus a previous forecast for an 8.1pc contraction.

"Government policies would need to be the main driver and to be targeted and timely," MPC secretary Titanun Mallikamas told a briefing. "Monetary policy will no longer play a major role."

The new economic forecasts suggested "the rising remoteness of future rate normalization", said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.

Thailand's economy suffered its worst contraction in more than two decades in the second quarter, but conditions have improved recently, with the removal of most virus curbs to revive activity.

Thailand's response included three rate cuts, soft loans, debt relief steps and a government package of 1 trillion baht ($33 billion).

The BOT forecast exports would fall 8.2pc this year before rising 4.5pc next year. But it cut to 3.6pc its 2021, GDP growth forecast from 5.0pc, due to fewer foreign visitors.

Foreign tourist numbers are forecast at 6.7 million this year, down from a projected 8 million, and at 9 million next year.

Last year, a record 39.8 million tourists spent the equivalent of 11.4pc of GDP.

The bank said 2020 headline inflation will be minus 0.9pc, versus a target range of 1pc-3pc.