Economy Economic Stimulus: Thailand's Fourth Rate Cut

[snoop1130]

Photo courtesy of Thai Newsroom

 

In a move aimed at reviving Thailand's sputtering economy, the central bank has once again reduced its key interest rate. This latest cut, announced on Wednesday, marks the fourth reduction in 10 months as the nation contends with stubborn economic challenges and external pressures.

 

The Bank of Thailand (BOT) opted to lower the one-day repurchase rate by 25 basis points to 1.50 percent, the lowest it has been in over two years. This decision was reached unanimously by the bank's monetary policy committee, reflecting a clear consensus on the need for further economic stimulus.

 

Economists had largely anticipated this development, with 23 out of 28 surveyed by Reuters predicting the cut. The remaining five economists foresaw no change.

The context for this decision is a backdrop of economic headwinds. Thailand’s economy is navigating negative inflation and grappling with the repercussions of US tariffs. These factors, coupled with structural problems, have weakened the country's economic competitiveness, particularly affecting small businesses.

 

The BOT's statement highlighted that while Thailand's economic growth is expected to align with previous forecasts, the second half of the year could see a slowdown. Their forecast remains cautious amidst ongoing trade uncertainties and domestic challenges like high household debt and sluggish tourism.

 

Despite the central bank's actions, the Thai baht saw a minor decline of 0.1 percent post-announcement, though Thai equities remained steady.

 

Deputy Governor Sethaput Suthiwartnarueput, who chaired his last meeting before Vitai Ratanakorn assumes the role on October 1, has underlined that keeping monetary policy accommodative is essential for fostering growth. His successor, Vitai, is also supportive of continued rate cuts to stimulate economic expansion.

 

Looking ahead, the next policy evaluation is slated for October 8, with keen eyes on how current measures will evolve under the new governor’s leadership.

 

In June, the BOT projected a 2.3 percent economic growth for 2025, anticipating a 4 percent rise in exports. This estimate accounts for the US maintaining a tariff rate of 18 percent on Thai goods. In 2024, the economy recorded a modest growth of 2.5 percent, trailing other regional markets.

 

Complicating matters further, recent changes in US trade policy saw a tariff reduction to 19 percent on Thai imports, down from 36 percent, bringing some relief. However, uncertainties persist, particularly concerning tariffs on transshipments via Thailand from third countries.

 

The BOT’s ongoing strategy reflects a commitment to supporting the nation's economic resilience amidst global and regional challenges. As the new governor steps in, stakeholders will closely watch for shifts in policy and their potential impacts on Thailand's economic trajectory.

 

  Adapted by ASEAN Now from Thai Newsroom 2025-08-13