Thailand central bank warns economy will contract in 2020, but holds fire on rates

By Orathai Sriring and Kitiphong Thaichareon

 

FILE PHOTO: Thailand's central bank is seen at the Bank of Thailand in Bangkok, Thailand April 26, 2016. REUTERS/Jorge Silva

 

BANGKOK (Reuters) - Thailand's central bank said on Wednesday it now expects Southeast Asia's second-largest economy to sharply contract this year as the coronavirus pandemic deals a severe blow to businesses and households.

 

At a monetary policy committee meeting, the Bank of Thailand (BOT) slashed its 2020 GDP forecast to minus 5.3%, which would be the first contraction since the global financial crisis in 2009, from 2.8% growth seen three months ago.

 

But it opted to save its dwindling policy ammunition by keeping its one-day repurchase rate <THCBIR=ECI> rate steady at 0.75%, after cutting it at a special meeting last week by 25 basis points to a record low.

 

The committee voted 4-2 to hold the rate unchanged. The dissenters voted for a 25 bp cut, while one member was absent.

 

"The committee viewed that the spreading of the COVID-19 in the period ahead would be severe and the situation would take some time before returning to normal," the MPC said in a statement.

 

Kobsidthi Silpachai, head of capital markets research of Kasikornbank, said "the vote of 4 to 2 for a hold coupled with the sharp downward revision should spell more monetary easing down the road given the risk of a deflation spiral".

 

In a Reuters poll, 10 economists had predicted a 25 bp cut on Wednesday while nine others forecast no policy change.

 

Tim Leelahaphan, economist at Standard Chartered, said: "We expect two further policy rate cuts of 25 bps each in Q2 and Q3, taking the rate to a new record low of 0.25% at end-2020".

 

The BOT has cut rates four times since August, with the shock from the virus outbreak heaping more pressure on the already struggling economy. Tourism has plunged due to global travel curbs and manufacturers are struggling with weakening demand and disruptions in supply chains.

 

Central banks around the world have slashed interest rates in the past few weeks and provided additional stimulus in some cases to try to help mitigate the damage to the global economy from the coronavirus pandemic. Governments are also ramping up relief measures.

 

The BOT slashed its 2020 export forecast to an 8.8% drop, from a 0.5% rise seen earlier.

 

It predicts foreign tourist numbers will tumble 60% to 15 million this year. So far, Thailand has reported 934 virus cases, with four deaths.

 

Last year's growth was just 2.4%, the lowest in five years.

 

The BOT said monetary policies would play a major role in helping the economy after it had recently introduced steps to ensure sufficient liquidity in the markets.

 

On Wednesday, the BOT announced measures to help retail borrowers ease their interest burdens, said Governor Veerathai Santiprabhob.

 

The BOT now expects headline inflation to be minus 1.0% this year versus plus 0.8% seen earlier and against its target range of 1-3%.

 

-- © Copyright Reuters 2020-03-25

Follow Thaivisa on LINE for breaking COVID-19 updates

While other governments around the world are busy freeing up monetary policy and introducing other measures to stimulate the economy, ours is happily sitting back and playing the fiddle until fearless leader makes decisions on topics he knows nothing about... as Thailand burns in the meantime.

Edited March 25, 20206 yr by bangkokfrog

11 hours ago, bangkokfrog said:

as Thailand burns in the meantime.

Maybe it's time for slash & burn in Thailand... out the ashes something better might rise!

19 minutes ago, hotchilli said:

Maybe it's time for slash & burn in Thailand... out the ashes something better might rise!

What gets me and it happens everywhere The vote Why is someone always absent on a serious vote like that? They are on the board for Christs sake Why they always missing? Are they paid to stay away in case vote goes close and not the way Gov wants? Who Knows?

14 hours ago, snoop1130 said:

But it opted to save its dwindling policy ammunition by keeping its one-day repurchase rate <THCBIR=ECI> rate steady at 0.75%, after cutting it at a special meeting last week by 25 basis points to a record low.

They can cut the rate more , it still won't help anything .

13 hours ago, bangkokfrog said:

While other governments around the world are busy freeing up monetary policy and introducing other measures to stimulate the economy, ours is happily sitting back and playing the fiddle until fearless leader makes decisions on topics he knows nothing about... as Thailand burns in the meantime.

I doubt he would make any monetary policies himself, he has his experts at the central bank, they are independent and will decide on their policy but will no doubt guide him in other matters. Waiting is better than going off half cocked, he can see what policies work in Europe and which don't.

It is a complicated situation between ruining the economy and looking after people's welfare, a fine line must be drawn, after all this isn't the bubonic plague.

At what stage will they actually understand the word DEVALUE ??

 

minus 5.3 %...i like the .3 in fact.... Since 20 % is Tourism alone and this will remain more or less flat until the end of the year, I am expecting a range of 10 to 20 %.....I am sure the Chinese will be happy to help.....

Looking strictly at USD vs Baht, I’d say with no immediate actions—things will only worsen.  USD up for this month—but not nearly enough to make a difference.

2 hours ago, fulhamster said:

At what stage will they actually understand the word DEVALUE ??

 

The Baht is already falling by itself. When you consider the massive amounts of money that the EU, USA and the UK have borrowed to combat the financial pain caused to workers and businesses the Baht should be standing tall or at least stationary but no it is falling against all three of these currencies, go Corona go.

The G20 are holding a video link up today, lots of countries will go bankrupt if this virus goes out to 6 months or more, some are already calling out for financial help from the world Bank and here's the Central Bank of Thailand warning the economy will contract, what economy, you probably wont have one .