The Bank of Thailand yesterday kept its benchmark interest rate unchanged for a fifth straight meeting to preserve its limited policy space, while reiterating concerns about a currency rally and lowering its economic growth forecast for next year.
The central bank held the policy rate at 0.5 percent in a unanimous decision, after cutting it by a total of 75 basis points earlier this year, and said that it stood ready to use more monetary tools if necessary.
The bank would “monitor the adequacy of the government measures and various risks, especially the new wave of the domestic outbreak, in deliberating monetary policy going forward. Fiscal measures must continue to sustain the economy,” a statement announcing the decision said.
Photo: Reuters
The COVID-19 pandemic has devastated two of Thailand’s main growth drivers, tourism and trade. The government has responded with a series of stimulus measures, recently approving an additional US$1.4 billion expenditure for the first quarter of next year.
A fresh COVID-19 outbreak over the weekend has added a new risk to the fragile recovery.
Strength in the baht, which has rallied more than 9 percent from this year’s low in April, has emerged as a key concern as the government seeks to support exports.
The baht was largely unchanged after the decision, up 0.13 percent to 30.2 baht per US dollar as of 4:12pm in Bangkok.
Seeking to stem baht gains, the central bank has issued a variety of measures to boost capital outflows, and its US dollar purchases pushed foreign reserves to a record US$255.8 billion in the week ended Dec. 11. Thailand was recently added to a US Department of the Treasury monitoring list over its foreign-exchange intervention.
The bank said that it might need to consider more measures to rein in the currency.
Yesterday, it revised up its growth forecast for this year — predicting a 6.6 percent contraction compared with a previous projection of a 7.8 percent decline — on an improvement in exports and private consumption.
It cut next year’s forecast to 3.2 percent growth, from 3.6 percent previously. The bank sees GDP growing 4.8 percent in 2022.
“The economic forecast next year has high risks, depending on the COVID-19 outbreak and vaccine,” Bank of Thailand Assistant Governor Titanun Mallilkamas said. “We have some policy space left and we’ll use it at the appropriate time with the most efficiency. We didn’t use it this time, but we will assess the situation next time.”
The central bank expects Thailand to welcome 5.5 million tourists next year, well below the 40 million figure from last year.
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