The Bank of Thailand has left its key interest rate unchanged at a record low on Wednesday, preserving its limited policy ammunition, but warned of risks as the country deals with a fresh wave of coronavirus infections.
Southeast Asia’s second-largest economy continues to recover but risks remain high and it could grow less than the previously forecast 3.2% this year, Monetary Policy Committee Secretary Titanun Mallikamas told a news conference.
The Bank of Thailand’s committee members voted unanimously to keep the one-day repurchase rate unchanged at 0.50% for a sixth straight meeting, after three cuts in the first half of 2020 to mitigate the impact of the pandemic.
The tourism-reliant economy still needs support from low interest rates and monetary policy will remain accommodative, he told Reuters.
The BOT said in a statement the impact of the recent outbreak on the Thai economy would be less severe than last year due to less strict containment measures, but it expects the economy to expand at a slower pace than previously forecast.
Support from the targeted government measures together with the export recovery will, however, support economic growth, it added. Twelve economists surveyed by Reuters had expected the BOT to remain on hold, with two analysts predicting a 25 basis-point cut, citing the impact from the new spread.
Ongoing global vaccinations
Kobsidthi Silpachai, head of capital markets research at Kasikornbank, said the policy rate was likely to stay at 0.50% this year as the central bank prefers targeted measures.
“The MPC emphasised that there is light at the end of the tunnel, pinning hopes on ongoing global vaccinations to help support the global, and eventually, local economic recovery,” he added.
However, Takit Chardcherdsak, economist at Asia Plus Securities, said “there is still a chance the key rate would be cut once more in the first half of the year…if the outbreak situation does not improve”.
Thailand had largely contained the coronavirus by mid-2020 but the new cases detected in December have led to infections across the country. Economists worry the latest outbreak will hurt the country’s fledgling recovery as tourism flounders.
In December, the BOT reduced its 2021 GDP growth outlook to 3.2% from 3.6% due to the slump in tourism. On Wednesday, it said its growth outlook was in line with the finance ministry’s projection.
Last week, the finance ministry slashed its growth outlook to 2.8% this year from 4.5%..
The BOT said exports this year could grow more than the forecast 5.7% but the number of foreign tourists would be less than the 5.5 million projected earlier.
Despite the strength of the baht, the BOT said it was moving in line with regional currencies.