Thailand holds key rate, cuts economic forecasts as exports stumble

By Orathai Sriring and Kitiphong Thaichareon

 

FILE PHOTO: The Bank of Thailand logo is seen in Bangkok, Thailand April 26, 2016. REUTERS/Jorge Silva/File Photo

 

BANGKOK (Reuters) - Thailand's central bank left its benchmark interest rate unchanged at a record low on Wednesday, while it cut its growth forecasts for this year and next as exports take a hit from the Sino-U.S. trade war and a strong baht.

 

The Bank of Thailand's (BOT) monetary policy committee (MPC) voted unanimously to keep the one-day repurchase rate <THCBIR=ECI> at 1.25%, a record low last seen during the global financial crisis.

 

The BOT trimmed its 2019 GDP growth forecast to 2.5% from 2.8% estimated in September and lowered its 2020 growth outlook to 2.8% from 3.3% on heightened external risks. Last year's growth was 4.1%.

 

Exports, a key driver of economic growth, are now expected to shrink 3.3% this year, compared with a 1% fall seen earlier. Next year's exports are expected to rise by a smaller 0.5%, rather than 1.7%.

 

"The Thai economy would expand below its potential and below the previous forecast, mainly as merchandise exports had contracted more than the previous assessment and were projected to recover more slowly than expected," the central bank said in a statement.

 

Southeast Asia's second-largest economy is facing flagging growth, below-target inflation, a climbing baht, risks to financial stability and falling consumer confidence.

 

Capital Economics said in a research report that it expects the central bank to ease once more in this cycle, with rates being lowered to just 1.0% by early next year.

 

Thammarat Kittisiripat, economist at Tisco Group, also expected a further quarter-point cut next year, as he saw growth of just 2.6% next year and limited government spending.

 

Graphic: Thailand's policy rate, GDP and CPI -

 

 

The MPC committee said in a statement the current policy rate remains accommodative for growth and supports prices moving toward the central bank's target - currently 1-4%.

 

The central bank cut its forecasts for headline inflation in 2019 to 0.7% from 0.8% previously, and to 0.8% from 1.0% for 2020.

 

The BOT also expressed concern about the strength of the baht <THB=TH>, Asia's best performing currency this year, which has risen around 7.6% against the U.S. dollar, putting further pressure on already weak exports.

 

All 16 analysts in a Reuters poll predicted no policy change.

 

In November, the MPC voted 5-2 to cut the rate by a quarter point after surprisingly delivering a similar reduction in August, the first easing since April 2015.

 

Thailand's economy expanded less than expected in the July-September quarter, as exports were weak.

 

To bolster the economy, the government this year launched $10 billion in stimulus plus additional steps, and the finance minister said more can be done if needed.

 

(Additional reporting by Satawasin Staporncharnchai; Editing by Jacqueline Wong)

 

-- © Copyright Reuters 2019-12-18

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A drop of 25 basis points going into the new year could have made a big difference but as usual everything just stays the same and so will the very low tourist numbers .

26 minutes ago, webfact said:

The central bank cut its forecasts for headline inflation in 2019 to 0.7% from 0.8%

Inflation on imported products is 20-40% due to the fact that prices never lowered with the exchange rate

 

We can be sure they will put the prices up when THB goes back though

Nothing to do with the trade war and everything to do with the Baht !

That news reminds me of watching a guy in the ocean that can’t swim !

18 hours ago, webfact said:

Southeast Asia's second-largest economy is facing flagging growth, below-target inflation, a climbing baht, risks to financial stability and falling consumer confidence.

Newsflash for Prayut &Co "read this"

Looks like Gypsy Lee has officially told them that it's all going bits-up

18 hours ago, webfact said:

Exports, a key driver of economic growth, are now expected to shrink 3.3% this year, compared with a 1% fall seen earlier.

Exports from Thailand declined by 4.54% y-o-y in October 2019!

The state planning agency sees exports falling 1.2% in 2019!

https://tradingeconomics.com/thailand/exports

Neither BOT nor government economic policies thus far have been adequate to alter the predictable downward spiral of the economy. The government wants to make an economic recovery a matter of BELIEF and not a matter of FACT.

Sounds to me that they are in dire need of some spiritual guidance. They should colloborate with TAT as they already have aquired a professional. Maybe they can get discount using that guy ofr two works.