Thailand’s central bank holds interest rates, slashes outlook for falling tourism GDP

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Bangkok: Thailand’s central bank left benchmark interest rates unchanged and lowered its forecast for economic growth this year and next. Indeed, Thailand is working on the biggest wave of Covid cases to date.

As the 25 economists expected in a Bloomberg survey, the Bank of Thailand yesterday maintained a record low of 0.5% in nine consecutive unanimous decisions.

Bank of Thailand deputy governor Titanun Malikamas said during a briefing in Bangkok that the country’s vaccination campaign would be the key to economic recovery.

The labor market recovery is slower than before and markets are more vulnerable than they are today, so they may be W-shaped rather than smooth returns.

The bank’s interest rate setting committee is “ready to use the limited political space at the most effective time,” Titanun said.

“Loan and debt restructuring is more about helping businesses and households than cutting interest rates.

The central bank has adjusted its forecast for 2021 gross domestic product (GDP) growth from the previous 3% to 1.8% due to the sharp decline in tourism during the pandemic.

The government plans to take calculated risks to stimulate the economy and fully reopen the Thai border to foreign visitors in October.

After the ruling, the market was largely unchanged, with the baht falling 0.4% against the dollar on that day, while the benchmark stock index remained up 0.3%.

Prime Minister Prayut Chan-Ocha this week decided to allow more social activities in the capital, despite the record number of Covid-related deaths yesterday.

As of June 21, about 11% of the population had at least the first vaccination.

The urgency of reopening Thailand stems from its dependence on tourism, which contributed about a fifth of economic output before the pandemic.

The cabinet finalized the “sandbox” in Phuket on Tuesday. This will allow vaccinated visitors to popular tourist islands from July 1 to travel without quarantine.

The decline in the central bank’s GDP follows similar measures by the Treasury and the country’s major economic planning agencies.

On June 1, the government approved new economic stimulus packages worth 140 billion baht (US $ 4.4 billion or RM 18.33 billion), including cash distribution programs and direct payments.

This month, Congress approved a plan to borrow US $ 16 billion (RM 67 billion) to meet financial needs.

The central bank previously announced a limited moratorium on debt until the end of the year to help small businesses suffer from the outbreak.

The increase in obligatory contributions by lenders to the relief funds of financial institutions will be decided later this year.

Gareth Leather, senior Asian economist at Capital Economics Limited, said in a post-decision survey note: “The poor economic outlook means monetary policy must remain loose for a long time. I will do it. “

“Our forecast is that the policy rate will not change until the end of 2022.”

Another important point from yesterday’s briefing is that the central bank lowered its GDP forecast for 2022 from 4.7% in March to 3.9%.

This year’s forecast for tourist arrivals, which has already been cut several times, has been lowered again from the previous 3 million to 700,000. – Bloomberg

Thailand’s central bank holds interest rates, slashes outlook for falling tourism GDP

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