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Thailand faces biggest economic contraction since Asian crisis
The bank slashed its growth forecast for this year, now expecting the economy to shrink 5.3 percent compared with an earlier estimate of 2.8 percent expansion.
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People wear protective masks due to the coronavirus outbreak, as they line up at casher counters at a super market in Bangkok, Thailand, March 16, 2020. (REUTERS/Soe Zeya Tun)
T
he Bank of Thailand left its benchmark interest rate unchanged after an emergency cut last week, while projecting the worst contraction in the economy since the Asian financial crisis more than two decades ago.
The bank slashed its growth forecast for this year, now expecting the economy to shrink 5.3 percent compared with an earlier estimate of 2.8 percent expansion. Exports and tourism, the key drivers of Thailand’s economy, have both been hard hit as the coronavirus outbreak spreads around the world.
The policy rate was maintained at a record low 0.75 percent Wednesday following a 25 basis-point reduction at an unscheduled meeting March 20. Four of the seven monetary policy committee members voted to hold, two called for a cut and one wasn’t able to attend.
“We believe they can cut by another 25 basis points. They could have used all the space they have now,” said Burin Adulwattana, chief economist at Bangkok Bank Pcl. “The economy is on the brink of a recession with huge downside risk, so it’s time to do all they can.”
Bank of Thailand Assistant Governor Titanun Mallikamas said Wednesday that policy makers stand ready to lower rates further if needed and will keep a close watch on markets, including the baht exchange rate. In a statement delivered through the Bank of Thailand’s Facebook page due to social-distancing precautions, he said the economy would recover only next year.
The benchmark SET Index extended gains after the decision, surging 6.3 percent to 1,099.32 as of 3:32 p.m. in Bangkok. The baht fell 0.3 percent against the dollar, paring an earlier loss of as much as 0.5 percent.
