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BoT cut rate to record low 0.5%

The Bank of Thailand cut the policy rate yesterday by 0.25 percentage points to a record low of 0.5%, saying that the Thai economy would contract more than the previous assessment

Boris Sullivan

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The Bank of Thailand cut the policy rate yesterday by 0.25 percent from 0.75 to 0.5 per cent effective immediately, Titanun Mallikamas, secretary of the MPC, said after the committee’s meeting on Wednesday (May 20).

 In deliberating their policy decision, the Committee assessed that the Thai economy would contract in 2020 more than the previous assessment due to the more-than-expected contraction of the global economy along with the containment measures worldwide. Headline inflation would be more negative than previously assessed. 

The Thai economy would contract more than the previous assessment

Tourism and merchandise exports were affected by trading partners’ economies more than expected. Meanwhile, domestic demand, both private consumption and private investment, would contract more than previously assessed due to higher unemployment and the containment measures. Nevertheless, financial and fiscal measures would help partly to alleviate liquidity problems of households and businesses as well as support the Thai economy to recover gradually. 

According to the Bank of Thailand’s latest data release, Thailand’s GDP could contract by 5.3 per cent in 2020, a sharp lowering from its 2.8 per cent previous projections in December.

The financial institution system remained sound

Commercial banks had robust capital fund and loan loss provision levels. Nevertheless, there remains a need to monitor the risks that may pose vulnerabilities to the stability of the commercial banking system in the period ahead, particularly defaults by businesses and households after the phase-out of liquidity support measures. 

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