Thailand warns economy to shrink in 2020

BANGKOK: Thailand’s central bank sharply downgraded its economic outlook for 2020 yesterday but kept interest rates on hold, warning that the impact from the coronavirus pandemic will be “severe”.

Thailand’s central bank voted four to two to keep the one-day repurchase rate rate steady at 0.75% after cutting it last week by 25 basis points to record lows.

But the Bank of Thailand (BOT) slashed its 2020 GDP forecast to minus 5.3%, which will be the first contraction since the global financial crisis in 2009.

Southeast Asia’s second-largest economy has cut rates four times since August as its tourism and manufacturing sectors struggle to overcome widespread disruptions to travel and factory supply chains.

In a Reuters poll, 10 economists had predicted a 25 bp cut yesterday while nine others forecast no policy change.

Tourism is a key growth driver for Thailand, which is considered one of the economies most vulnerable to the virus in Southeast Asia due to its heavy reliance on Chinese tourists and China trade. Foreign tourist receipts accounted for 11% of Thailand’s GDP last year.

Yesterday, the BOT announced measures to help retail borrowers ease their interest burdens, said governor Veerathai Santiprabhob.

The BOT now expects headline inflation to be minus 1.0% this year versus plus 0.8% seen earlier and against its target of 1-3%. – Reuters