Thai cen­tral bank holds rate, cuts 2016 growth

The Pak Banker - - COMPANIES/BOSS -

Thai­land's cen­tral bank on Wed­nes­day held its key in­ter­est rate and cut its 2016 growth fore­cast, say­ing eco­nomic mo­men­tum is slow­ing as the im­pact of the govern­ment's short-term stim­u­lus mea­sures is fad­ing.

The Bank of Thai­land, whose key rate was held at 1.50 per­cent as ex­pected, re­vised its 2016 eco­nomic growth pro­jec­tion to 3.1 per­cent from 3.5 per­cent.

It also cut its 2016 ex­ports fore­cast to a con­trac­tion of 2 per­cent in­stead of no ex­pan­sion. "Over­all eco­nomic mo­men­tum slowed, fol­low­ing dis­si­pa­tion of the ef­fect of the govern­ment's tax re­bate mea­sure around the end of last year and of the ac­cel­er­ated car pur­chase prior to the in­crease in ve­hi­cle ex­cise tax this year," the Mon­e­tary Pol­icy Com­mit­tee said in a state­ment. The MPC has left the rate un­changed since sur­prise cuts in March and April 2015. The BOT said the cur­rent pol­icy rate sup­ports eco­nomic re­cov­ery and the "pol­icy space should be pre­served".

All but two of 28 econ­o­mists polled by Reuters had pre­dicted no pol­icy change on Wed­nes­day. Two fore­cast a 25 ba­sis-point cut. Many see no change through­out 2016, as more than a year of de­clin­ing con­sumer prices gives pol­i­cy­mak­ers lee­way to keep mon­e­tary pol­icy easy. Al­though an army coup in May 2014 ended months of political un­rest, South­east Asia's se­cond-largest econ­omy has yet to re­gain trac­tion, with ex­ports and do­mes­tic de­mand still weak. The econ­omy grew 2.8 per­cent last year, up from 0.8 per­cent in 2014 but its re­cov­ery re­mains frag­ile.

In a bid to lift ac­tiv­ity, the mil­i­tary junta in­tro­duced eco­nomic mea­sures and stepped up in­fra­struc­ture projects. It plans more stim­u­lus, in­clud­ing home loans for low-in­come earn­ers, a tax break and cash hand­outs to spur spend­ing.

San­ti­tarn Sathi­rathai, se­nior econ­o­mist of Credit Suisse in Sin­ga­pore, said: "We con­tinue to think that the Bank of Thai­land will likely cut rate later this year as the cur­rency strength com­bined with slug­gish growth and low in­fla­tion im­prove the risk re­ward of eas­ing fur­ther." Jack Cham­bers, se­nior econ­o­mist at Moody's An­a­lyt­ics in Syd­ney, said busi­ness and con­sumer con­fi­dence "re­main weak and un­likely to im­prove in the near term." While BOT will be re­luc­tant to ease too much due to high house­hold debt lev­els, Cham­bers said he ex­pects a 25 ba­sis point cut by the end of the se­cond quar­ter.

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