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Thai central bank seen cutting key rate to help economy in recession

2 Mins read
imageEconomy13 hours ago (May 18, 2020 05:40AM ET)

(C) Reuters. FILE PHOTO: The Bank of Thailand logo is seen in Bangkok

By Orathai Sriring

BANGKOK (Reuters) – Thailand’s central bank is widely expected to cut its benchmark interest rate to a new low at its policy review on Wednesday to cushion the economy from the impact of the coronavirus outbreak.

Sixteen of 18 economists in the poll predicted the Bank of Thailand’s (BOT) monetary policy committee would cut its one-day repurchase rate by 25 basis points to 0.50% – which will be the fifth reduction in borrowing costs since August.

The other two economists forecast the central bank would keep the rate at 0.75%, the lowest on record.

The BOT left the rate unchanged at its March 25 meeting after cutting it by a quarter point at a special meeting on March 20, saying the effects of the pandemic would be more severe than previously expected.

On Monday, Thailand reported its economy contracted 1.8% in the first quarter from a year earlier, and 2.2% from the December quarter, as social restrictions to halt the spread of the pandemic hit tourism and domestic activity.

The National Economic and Social Development Council (NESDC), which complies GDP data, slashed its 2020 GDP outlook to a 5.0-6.0% contraction from growth of 1.5-2.5% seen earlier, with exports expected to fall 8%.

In March, the BOT forecast the economy would shrink 5.3% this year, the deepest contraction since the 1997-98 Asian financial crisis.

“We continue to look for another easing of 25 bps in this meeting,” said Kobsidthi Silpachai, head of capital markets research at Kasikornbank.

“The NESDC forecasts are painting that the economic outlook will get worse before it gets better,” he added.

Tim Leelahaphan, economist at Standard Chartered (OTC:SCBFF) Bank, predicts a quarter point cut this week and a similar reduction in the third quarter.

But some think policymakers may want to wait to assess the effects of government and central bank steps introduced to mitigate the impact of the virus, which had also prompted banks to cut their lending rates.

“We think the policy rate could go lower this year, but it may not be at this time,” said Phacharaphot Nugtramas, economist at Krung Thai Bank.

Thailand has reported 3,031 confirmed cases and 56 deaths since the outbreak started in the country in January.

The government on Sunday opened malls and department stores for the first time since March in its second phase of relaxing measures as the number of coronavirus cases slowed.

Thai central bank seen cutting key rate to help economy in recession

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