Connect with us

Banking

Thailand’s Monetary Policy remains stable as COVID-19 outbreak is weighing on Thai economy

The Bank of Thailand held the interest rate steady at 0.5% during its scheduled meeting in August. Current risks are pointing to the downside, with the country’s slow inoculation campaign, low tourist arrivals, and raging COVID-19 outbreak weighing on the economy

Published

on

bank of thailand

The Bank of Thailand held its interest rate steady at 0.5% during its scheduled meeting in August, as a raging COVID-19 outbreak is weighing on Thailand’s economy.

Manufacturing and exports have been rare bright spots during the outbreak, but these sectors are at risk from virus clusters in factories and the country’s slow inoculation campaign. We expect the central bank to hold its interest rate steady for the rest of this year.

If it needs to support the economy further, we expect it will look to other tools given the limited scope for an interest rate reduction.

Thailand Monetary Policy, %

 Aug 21Jul 21Jun 21May 21Apr 21Mar 21Feb 21
Policy rate0.500.500.500.500.500.500.50

The Numbers

  • The Bank of Thailand kept its benchmark interest rate unchanged at 0.5%.
  • Thailand’s GDP shrank by 2.6% y/y in the first quarter, after a 4.2% contraction in the fourth quarter. On a seasonally adjusted basis, GDP grew by 0.2% q/q in the first quarter, down from a revised 1.1% increase in the December quarter.
  • Exports surged by 46.1% y/y in June, following 44.4% growth in May.
  • Consumer prices increased by 1.3% y/y in June, after increasing by 2.4% in May.

Behind the Numbers

The Bank of Thailand held the interest rate steady at 0.5% during its scheduled meeting in August. Current risks are pointing to the downside, with the country’s slow inoculation campaign, low tourist arrivals, and raging COVID-19 outbreak weighing on the economy. COVID-19-related infections and deaths are at record levels with no signs of abating, despite 13 provinces under strict restrictions.

The government expanded lockdown measures on Tuesday to 29 provinces that are home to 40% of the population and generate three-quarters of Thailand’s GDP.

The Thai baht is down 9.5% against the dollar this year and will remain weak in the short term, as strict restrictions have hurt consumption and battered the tourism industry.

In contrast, the weak baht is positive for exports, which have emerged as a key growth driver. June shipments jumped by 43.8% from the same period last year, the fastest pace in 11 years, as global demand revived.

Manufacturing and exports have been rare bright spots during the outbreak. However, these sectors are at risk from virus clusters in factories. The rise of COVID-19 infections in Southeast Asian nations could disrupt supply chains and hurt the export sector, particularly for production lines dependent on intraregional trade.

The government passed a THB1 trillion borrowing program last year and added another THB500 billion this year amid the recent wave. However, fiscal policy is inadequate considering the enormous and broad-based impact of the outbreak.

Thailand’s vaccination rollout and fiscal policy will play a more important role than monetary policy in supporting growth, given the limited scope for an interest rate reduction by the Bank of Thailand.

Click to comment

Leave a Reply

Banking

The Thai banking system remained resilient in Q3 2021 says BoT

The Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to serve an important role in assisting borrowers and accommodating loan demand to support economic recovery amidst uncertain COVID-19 situation, said Bank of Thailand latest press release.

Published

on

64cb74e9 atm bank

The Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to serve an important role in assisting borrowers and accommodating loan demand to support economic recovery amidst uncertain COVID-19 situation, said Bank of Thailand latest press release.

(more…)
Continue Reading

Economics

Stable outlook for APAC sovereigns as growth rebounds and debt stabilizes

Economic growth rates in Asia-Pacific are broadly rebounding and debt burdens stabilizing, giving rise to a stable outlook for sovereign creditworthiness in 2022. Still, the pace of recovery differs vastly, and some economies will experience deep economic scarring, according to a new report by Moody’s Investors Service.

Published

on

moodys flare

Economic growth rates in Asia-Pacific are broadly rebounding and debt burdens stabilizing, giving rise to a stable outlook for sovereign creditworthiness in 2022. Still, the pace of recovery differs vastly, and some economies will experience deep economic scarring, according to a new report by Moody’s Investors Service.

(more…)
Continue Reading

Recent

Most Read

Join 14,204 other subscribers