Thailand Prepares for Bold Rate Cuts to Spur Economic Recovery

[webfact]

Bank of Thailand. File photo

 

Faced with a lacklustre economic outlook, the Bank of Thailand is poised to launch an aggressive series of interest rate cuts, potentially the most drastic in Southeast Asia. Analysts suggest that these cuts will be essential to counteract the country's sluggish recovery from the pandemic and increasing global trade tensions.

 

According to Nomura Holdings, the central bank may need to implement up to 100 basis points of rate cuts over the next year, while Bank of America predicts a reduction of 75 basis points by 2026. Such moves would see Thailand leading the region in aggressive monetary easing.

 

Nomura's economist Charnon Boonnuch has highlighted Thailand's vulnerability to increasing global trade protectionism, with a particular focus on the ongoing trade disputes spearheaded by the United States and fading tourism revenues.

 

Historically, the Bank of Thailand (BoT) has resisted such measures, holding interest rates steady despite political pressures. Recent signals, however, suggest a shift towards accommodating economic stimulus through rate cuts. The central bank's hesitance has not gone unnoticed, with baht swaps reflecting an expectation for further easing, alongside a notably dovish tone in their February meeting minutes.

 

 

 

Thailand, Southeast Asia's second-largest economy, faces myriad challenges, including an ailing manufacturing sector, elevated household debt, and stagnating consumption. With a GDP growth averaging below 2% over the past decade, the BoT's actions have been under scrutiny. Last year's surprise rate cuts in October and February marked a change in stance, but a full easing cycle is yet to be decisively undertaken.

 

The ongoing trade war exacerbates the situation, particularly with US tariffs possibly dampening Thailand's export sector and increasing competition from Chinese imports. The BoT estimates that these global tensions could slash up to 0.5% from the GDP growth projection, which is slightly above 2.5% for this year.

 

Domestically, the aftermath of the pandemic persists, with households and small businesses grappling with unmanageable debt. Current government measures, including cash handouts, have had limited effectiveness in boosting economic activity.

 

To combat these issues, the Thai government and central bank have introduced measures aimed at bolstering the economy. These include relaxing mortgage regulations and addressing non-performing consumer loans. However, many argue that lowering rates further, ideally to as low as 1%, would provide broader economic relief.

 

Given the government's limited fiscal space—with public debt hovering around 64% of GDP—there is a palpable need for the BoT to engage in substantial rate cuts soon. This move could help alleviate structural constraints that have long hampered Thai economic growth, where previous policies have often emphasised short-term consumption rather than long-term structural reform, reported Bangkok Post.

 

-- 2025-03-21

 

 

[Guderian]

With a base rate already not much above zero at 2%, there's not exactly a lot of room for 'aggressive' rate cuts. Unless they want to venture into the realms of deeply negative rates, but that didn't work out too well in the West, and Thailand's rickety banks might not be able to weather the loss of their overnight deposit income, much less pay to make deposits with the BoT. Which leaves massive QE, but with the public debt already being very high how much QE would the markets accept before they trashed the currency? Plus, QE can have a very expensive downside when you try to unwind it, as the Bank of England and Treasury are learning, well over £100 billion in losses are expected. The paper we're not allowed to quote from has a good article, just search for 'economy waiting to hit an iceberg'.

[WHansen]

I just read the article you mentioned. Could be trouble ahead. Thanks.

[dinsdale]

Spend, spend, spend, borrow, borrow, borrow and eventually it catches up with you. My non-economist POV.

[redwood1]

1 hour ago, WHansen said:

I just read the article you mentioned. Could be trouble ahead. Thanks.

 

Well a devaluation of the baht sounds good to me.....

 

The baht is due for a correction after many decades of strength...

[Celsius]

1 minute ago, redwood1 said:

 

Well a devaluation of the baht sounds good to me.....

 

The baht is due for a correction after many decades of strength...

 

Devaluation of baht and increase in everything else.

 

Inflation coming.

[Purdey]

Bang goes my savings growth. Can't save in the bank nor the stock market. 

[Albaby]

35 minutes ago, Purdey said:

Bang goes my savings growth. Can't save in the bank nor the stock market. 

All my investments are in AUD. I'm drooling at the prospect of a return to the good old days of  32 to1.

[hotchilli]

15 hours ago, redwood1 said:

 

Well a devaluation of the baht sounds good to me.....

 

The baht is due for a correction after many decades of strength...

Back to the old days when the baht was worth something

[Caldera]

That should tank the baht, which I would welcome (if for entirely selfish reasons of my own)...

[OneZero]

The Thai Navy's suggestion:  Buy another CCP submarine.

[John Drake]

19 hours ago, Celsius said:

 

Devaluation of baht and increase in everything else.

 

Inflation coming.

 

This is why . . . Prayuth was better.

[worgeordie]

How much can they cut it , I am only getting 1 % on my retirement

fixed account , they say inflation is very low 1.5 % ? , not on the price

rises I have seen lately ,

 

regards worgeordie  

[daveAustin]

On 3/21/2025 at 4:16 PM, Guderian said:

With a base rate already not much above zero at 2%, there's not exactly a lot of room for 'aggressive' rate cuts. Unless they want to venture into the realms of deeply negative rates, but that didn't work out too well in the West, and Thailand's rickety banks might not be able to weather the loss of their overnight deposit income, much less pay to make deposits with the BoT. Which leaves massive QE, but with the public debt already being very high how much QE would the markets accept before they trashed the currency? Plus, QE can have a very expensive downside when you try to unwind it, as the Bank of England and Treasury are learning, well over £100 billion in losses are expected. The paper we're not allowed to quote from has a good article, just search for 'economy waiting to hit an iceberg'.

Can quote those guys all you like, just can’t embed their links.

[daveAustin]

Problem here is, aside from oil & gas and a banking system that sucks giant monkey balls, Thailand doesn’t make much and its workforce is inefficient. Some of the best engineers I’ve worked with and people can be well switched on as with anywhere in the world. But when you get to grassroots level with the ‘normal’ folk, they can be slovenly foot shovellers and unreliable and also nowadays don’t like to do menial jobs like labouring. All this inefficiency costs businesses time and money. And that is just fine actually as these guys also know how to enjoy life. The West is sick and has it wrong. F the monetary system!

[Celsius]

I anticipate some significant staffing reductions on the horizon. Specifically, the number of employees in the Home Pro mattress section will be reduced from 17 to 15.

[stupidfarang]

On 3/21/2025 at 4:16 PM, Guderian said:

With a base rate already not much above zero at 2%, there's not exactly a lot of room for 'aggressive' rate cuts. Unless they want to venture into the realms of deeply negative rates, but that didn't work out too well in the West, and Thailand's rickety banks might not be able to weather the loss of their overnight deposit income, much less pay to make deposits with the BoT. Which leaves massive QE, but with the public debt already being very high how much QE would the markets accept before they trashed the currency? Plus, QE can have a very expensive downside when you try to unwind it, as the Bank of England and Treasury are learning, well over £100 billion in losses are expected. The paper we're not allowed to quote from has a good article, just search for 'economy waiting to hit an iceberg'.

what is the name of the paper? "The paper we're not allowed to quote from"

[stupidfarang]

On 3/21/2025 at 7:02 PM, WHansen said:

I just read the article you mentioned. Could be trouble ahead. Thanks.

what is the name of the paper? 

[JimHuaHin]

5 5 5

 

Massive interest rate cuts will not save the Thai economy.

 

Substantial economic restructuring, worker upskilling and the death of most monopolies/duopolies are needed.

 

 

[hotsun]

If the US has a recession, it will be much worse for thailand

[Guderian]

2 hours ago, stupidfarang said:

what is the name of the paper? "The paper we're not allowed to quote from"

 

The BKK Post

[watchcat]

17 hours ago, OneZero said:

The Thai Navy's suggestion:  Buy another CCP submarine.

 

With an engine.

[Purdey]

The theory is that low interest rates will encourage businessmen to borrow money to build something that will help improve the economy. 

But what if businessmen don't want to have more debt of any kind during a period of sluggish economy because people can't buy their goods?

[stupidfarang]

52 minutes ago, Guderian said:

 

The BKK Post

thank you. There was an excelent documentary ondebt within the middle class of Thailand on youtube 

 

[BangkokReady]

On 3/21/2025 at 4:16 PM, Guderian said:

Unless they want to venture into the realms of deeply negative rates

 

What happens when rates go into negatives?  Do they start taking money from depositors and paying money to borrowers?

[BangkokReady]

3 hours ago, stupidfarang said:

thank you. There was an excellent documentary on debt within the middle class of Thailand on YouTube 

 

I watched this the other day.  Amazing the level of debt people were willing to go into just so they could create the façade of living a good life.

 

That one guy was like, "I wanted to have a successful life, a house and a car, so I borrowed the money to have those things, even though I cannot afford to pay it back."  He wanted to have the appearance of success, even though he hadn't actually achieved it.

[connda]

If the PTB hadn't have destroyed the small and medium size business (you know - the NON-ESSENTIAL ones) then they wouldn't have to aggressively inflate the economy.  Which will lead to inflation, which in turn will make it even more difficult for average people to live.  It's almost like it's planned that way, 'eh?  🤔

[connda]

1 hour ago, BangkokReady said:

 

I watched this the other day.  Amazing the level of debt people were willing to go into just so they could create the façade of living a good life.

 

That one guy was like, "I wanted to have a successful life, a house and a car, so I borrowed the money to have those things, even though I cannot afford to pay it back."  He wanted to have the appearance of success, even though he hadn't actually achieved it.

It's pretty sad what other people consider "success."  I consider success a roof over my head, food on the table, good health, and family.  Everything else is gravy.  Which is why I'm not in debt and others are up to their eyeballs in debt.  My lifestyle doesn't reflect what's "in the bank." I've never had any interest in "Keeping up with the Jones Shinawatras" in appearances.  Those who do?  Fools.

[sidneybear]

On 3/22/2025 at 3:10 PM, Albaby said:

All my investments are in AUD. I'm drooling at the prospect of a return to the good old days of  32 to1.

Don't hold your breath. Australia is also in a sorry state, so it's a race to the bottom. 

[Sir Dude]

Only thing to do is to do debt cancellation and the government absords it... but ban those that use the service from borrowing again. Give them a clear slate, but don't let them do the same BS again.