Thai economy to shrink more than expected

Job losses mount, baht strength could affect recovery

BANGKOK: Thailand’s economy will contract more than expected this year and the jobs outlook to deteriorate sharply from the impact of the coronavirus outbreak, minutes from the central bank’s latest meeting showed.

The Bank of Thailand’s (BOT) policy committee voted 4-3 on May 20 to cut the one-day repurchase rate by 25 basis points to a record low of 0.50%, with the three dissenters favouring no policy change.

The committee expressed concerns the baht could strengthen and hurt economic recovery, adding the BOT would closely monitor market developments, according to the minutes.

“The committee would examine measures to lessen pressures from gold exports on the baht,” the minutes said.

The central bank said on Monday it was ready to take steps to curb a rapid rise in the currency. It met with exporters and foreign exchange traders yesterday to discuss the baht.

In March, the BOT predicted the economy would shrink 5.3% this year, the biggest contraction since the 1997-98 Asian financial crisis. The central bank will next update its economic forecasts at its June 24 policy review.

The latest rate cut was the third this year to help support South-east Asia’s second-largest economy whose exports and tourism have been hit by the pandemic.

The minutes highlighted concerns about employment, which the committee said would deteriorate sharply and take a long time to return to normal.

“Some workers may be temporarily unemployed during the containment period. Others, however, could be permanently unemployed due to business insolvencies resulting in shutdowns, layoffs from weak demand, or greater use of automation,” the minutes said.

The poor jobs outlook would delay the economic recovery and reduce the economy’s long-term potential growth, causing “lasting economic scars after the crisis,” the minutes said.

The state planning agency has said Thailand may lose up to 2 million jobs this year and 8.4 million are at risk of losing their jobs. — Reuters

“The committee would examine measures to lessen pressures from gold exports on the baht.” Bank of Thailand