The monetary policy committee is keeping the key rate at 1.25% at a meeting on Wednesday.
The Bank of Thailand (BoT) left its policy rate stable at an all-time high on Wednesday, as expected, after lowering it twice this year, but again lowered its growth forecast for this year and next in due to increased external risks and a strong baht.
The bank’s Monetary Policy Committee (MPC) voted unanimously to keep the overnight rate at 1.25%, a level last seen during the global financial crisis.
The BoT cut its GDP growth forecast for 2019 to 2.5% from an estimated 2.8% in September and lowered its growth outlook for 2020 to 2.8% from 3.3% due to increased external risks . Growth last year was 4.1%.
Exports, a key driver of economic growth, are now expected to decline 3.3% this year, down from a 1% drop seen earlier. Exports for next year are expected to increase 0.5% rather than 1.7%.
“The Thai economy is expected to grow below its potential and below previous forecasts, mainly because merchandise exports had contracted more than the previous assessment and are expected to recover more slowly than expected,” the bank said. central in a press release.
Southeast Asia’s second-largest economy is facing weakening growth, below target inflation, a rising baht, risks to financial stability and declining consumer confidence.
Capital Economics said in a research report that it expects the central bank to ease again during this cycle, with rates being cut to just 1.0% early next year.
Thammarat Kittisiripat, economist at Tisco Group, also expected a further quarter point decline next year, as he saw only 2.6% growth next year and limited public spending.
The MPC committee said in a statement that the current policy rate remains accommodative for growth and supports price movement towards the central bank’s target – currently 1-4%.
The central bank lowered its forecast for headline inflation in 2019 to 0.7% from 0.8% previously, and to 0.8% from 1.0% for 2020.
The BoT also expressed concern over the strength of the baht, Asia’s best-performing currency this year, which rose about 7.6% against the US dollar, putting additional pressure on already weak exports. .
The 16 analysts in a Reuters poll did not predict any policy change.
In November, the MPC voted 5-2 to cut the rate by a quarter point after surprisingly delivering a similar cut in August, the first easing since April 2015.
The Thai economy grew less than expected during the July-September quarter as exports were weak.
To support the economy, the government this year launched a 316 billion baht stimulus package along with additional measures, and the finance minister said more could be done if needed.