The Bank of Thailand cut its benchmark interest rate to a record low as a coronavirus outbreak in China, a stalled government budget and bad drought imperil economic growth.
The central bank yesterday lowered the policy rate by 25 basis points to 1 percent in a unanimous decision, the third cut in its past five meetings.
The baht extended its loss to as much as 0.9 percent against the US dollar after the decision, before recovering and trading little changed at 30.958 versus the US currency.
Photo: AFP
The benchmark stock index closed 0.97 percent higher at 1,534.14.
The virus has delivered a severe blow to Thailand’s tourism industry, undermining the outlook for the economy.
Officials already were grappling with the worst drought in four decades, a prolonged delay in the implementation of the 3.2 trillion baht (US$103 billion) annual budget and shrinking exports.
“The outbreak may be temporary, but it’s a huge shock to the economy,” said Naris Sathapholdeja, chief economist at TMB Bank PCL in Bangkok. “Cutting borrowing costs helps to alleviate the pressure on the private sector.”
Bank of Thailand Assistant Governor Titanun Mallikamas told reporters the baht was likely to remain volatile going forward.
Even after falling 3.6 percent this year — making it the worst performer among Asian currencies — he said the baht might still be out of line with economic fundamentals after last year’s rapid rise.
The monetary policy committee said the Thai economy — expected to grow 2.8 percent this year — “would expand at a much lower rate in 2020 than the previous forecast.”
Inflation this year and next “was projected to be below the lower bound” of the target, set at 1 to 3 percent.
The bank is likely to revise the economic growth forecast at its next meeting, Titanun said.
Data released earlier yesterday showed that Thai consumer confidence last month fell for an 11th straight — even before the coronavirus scare had much time to affect the economy.
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