Thu, Nov 28, 2013 - Page 15 News List

Thailand cuts interest rates abruptly amid protests

MELTDOWN:The protests calling for the civil service to oust the Thai prime minister have already impacted the work of government, tourism and the economy

Bloomberg

Thailand unexpectedly cut its key interest rate for a second time this year, as escalating anti-government protests threaten investor confidence and local demand, hurting the nation’s growth outlook. The baht fell.

The Bank of Thailand cut its one-day bond repurchase rate by a quarter of a percentage point to 2.25 percent, with monetary policy committee members voting six-to-one in favor of the decision, it said in Bangkok yesterday. All 19 economists in a Bloomberg survey predicted the rate would be held.

Thai protesters this week besieged government ministries and urged civil servants to join a push to oust Thai Prime Minister Yingluck Shinawatra, an escalation of rallies that began a month ago against an amnesty for most political offenses stretching back to the 2006 coup that ousted her brother. The economy expanded a less-than-estimated 1.3 percent in the third quarter on the last quarter.

“The central bank seems to be concerned about growth and the sluggish exports, and on top of that, there’s the political concern,” said Kozo Hasegawa, a Bangkok-based foreign-exchange trader at Sumitomo Mitsui Banking Corp. “Should the protests prolong and impact government spending, tourism and the economy further, they could consider another cut.”

Protest leader Suthep Thaugsuban, who oversaw a deadly crackdown on Thaksin supporters when he was deputy premier in 2010, has called for a nationwide program of civil disobedience to bring down the administration of Yingluck, whose Pheu Thai party won a parliamentary majority in elections in 2011. A confidence vote is scheduled for today.

The bank yesterday cut its growth forecast for this year to about 3 percent from 3.7 percent earlier, and its estimate for next year to about 4 percent from 4.8 percent.

“There are higher downside risks to growth stemming from delays in government investment and fragile private confidence, which could be compounded by the ongoing political situation,” Assistant Governor Paiboon Kittisrikangwan said yesterday. “Given the benign inflation outlook and moderating household credit growth, there is room for monetary policy to mitigate downside risks to the economy.”

Yingluck’s administration has tried to speed up budget disbursement and boost local demand as plans to spend 2 trillion baht (US$62 billion) on infrastructure and 350 billion baht on water management projects have stalled.

Consumer confidence last month fell to the lowest since March last year, while exports slipped for a second straight month, data yesterday showed.

The state forecasting agency this month cut its full-year expansion estimate to 3 percent from a range of 3.8 percent to 4.3 percent, and said it expected no export growth this year.

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