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Markets

Thai central bank seen holding key rate steady, likely to cut GDP forecast

  • A recent weaker baht should also help exports, another key driver of Thailand's economy.
22 Mar, 2021

BANGKOK: Thailand's central bank is expected to maintain policy for a 10th straight month and leave its key rate at a record low, but will likely cut its outlook for economic growth when it meets on Wednesday, a Reuters poll showed.

The Bank of Thailand's current forecast for GDP in 2021 calls for 3.2% growth but Governor Sethaput Suthiwartnarueput said last month that growth could be in the "upper 2% levels".

A second wave of coronavirus outbreaks in December has hampered an economic recovery and the Finance ministry in January cut its GDP forecast to 2.8% growth from 4.5%.

With few policy tools left at its disposal, all 14 economists surveyed believe the central bank's Monetary Policy Committee will hold its one-day repurchase rate at 0.50%.

The rate has been unchanged since three reductions between February-May 2020, when the COVID-19 pandemic first devastated the tourism-reliant economy.

Thailand has, however, largely contained the second wave of infections and has eased restrictions to boost domestic activity while preparing to gradually reopen to foreign visitors.

Takit Chartchredsak, an economist at Asia Plus Securities, now expects no policy change throughout 2021, revising his previous view that there could be one more rate cut in the second quarter.

"We see the economy is improving quickly as the lockdown was relaxed sooner than expected. But the recovery will still take time," he said.

A recent weaker baht should also help exports, another key driver of Thailand's economy.

Tim Leelahaphan, an economist at Standard Chartered, noted that the rate was already close to zero, adding that "the effectiveness of previous rate cuts in boosting the economy is unclear."

At its last meeting, the BOT said the outlook for the economy remained highly uncertain and what limited policy options it had should be used at the most effective time.

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