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Bank of Thailand cuts policy interest rate 50 basis points to 1.50%

BANGKOK: -- In an effort to boost local spending as global economy continues severely affecting the country, the Bank of Thailand (BoT)’s Monetary Policy Committee (MPC) on Wednesday cut its policy interest rate by 50 basis points to 1.50 per cent, said the central bank assistant governor Duangmanee Vongpradhip.

Effective immediately, the policy interest rate will be reduced to 1.50 per cent as the global economic recession has impacted the Thai economy, especially its exports, while the country's domestic purchasing power is still weak.

It would take some time for the Thai government’s economic stimulus programmes to bear fruit, said Miss Duangmanee.

Justifying the necessity for the cut, she said the MPC also believes that Thailand’s economy faces a high risk that its growth could fall below zero in 2009.

Thailand’s gross domestic product (GDP) could contract for four consecutive quarters until third quarter and start recovering late this year, but it would not be too severe like in the fourth quarter of 2008 when GDP contracted 4.3 per cent, she said. The government’s economic stimulus programmes plus the cut in the policy interest rate will help stimulate local spending while the US economy is expected to recover late this year.

Miss Duangmanee said she is optimistic that Thailand’s GDP would not contract sharply in the first quarter of 2009, thanks to investment by the public sector.

MPC has so far cut its policy interest rate in the past three meetings since December, including Wednesday, making the real interest rate of the country at 1.9 per cent, still higher than several countries.

-- TNA 2009-02-25