Economist at UOB Group Barnabas Gan assesses the recent decision by the Bank of Thailand (BoT) to leave monetary conditions unchanged at its meeting.
Key Quotes
“The Bank of Thailand (BOT) kept its one-day repurchase rate unchanged at 0.50% for the fourth consecutive meeting. The last time it made a move was in May when the benchmark rate was cut by 25 basis points. The decision to keep its policy rate unchanged was voted unanimously by all seven committee members.”
“Notwithstanding the better-than-expected economic performance in 3Q20, policy-makers assessed that the low policy rate is still needed to support economic recovery. The Bank of Thailand also views that keeping its benchmark rate unchanged will also serve to ‘preserve the limited policy space’.”
“BOT however made little comments on Thailand’s GDP trajectory for 2020, thus keeping to its view of a contraction of 7.8% for the whole of 2020. This is compared to the recent GDP upgrade by the National Economic and Social Development Council, which raised its GDP target to an average of -6.0% for 2020, up from a previous range of between -7.3% and – 7.8%. On inflation, policy-makers deem that medium-term inflation expectations remained anchored within its 1 – 3% range.”
“Similar to past rhetoric, the central bank remains concerned over the rapid appreciation of the THB, as ‘this affected the fragile economic recovery’. Note that the THB has strengthened to 30.16 per USD as of 11 November 2020, from 32.98 per USD (or +8.6%) in April 2020.”
“Beyond the THB strength, we remain concerned over the political noise that could further threaten the already fragile economic recovery. Separately, the rising non-performing loans & household debt levels observed year-to-date could inhibit potential growth momentum in the foreseeable future should it stay unchecked.”
“Given the better-than-expected economic performance in 3Q20 amid the need to preserve policy space, we keep our call for BOT to leave its benchmark rate unchanged at 0.50% for the rest of 2020. The next (and last) meeting in 2020 will be on 23rd December.”
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