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Economist at UOB Group Barnabas Gan reviews the latest interest rate decision by the Bank of Thailand (BoT).

Key Quotes

“The Bank of Thailand (BOT) kept its one-day repurchase rate unchanged at 0.50% as widely expected for the sixth consecutive meeting on 3 February 2021… The decision to keep its policy rate unchanged was voted unanimously by all committee members.”

“Policy-makers viewed that the recent spike in COVID-19 infection and the subsequent containment measures implemented would only ‘affect the Thai economy in the short term’. Moreover, the uncertainties surrounding the economic outlook is high with ‘considerable downside risks’. The recovery prospect is also ‘highly uncertain’, which will depend on how COVID-19 evolves in the immediate future.”

“The BOT kept its economic outlook for GDP to expand 3.2% in 2021 and by a further 4.8% in 2022. This contrasts with the Finance Ministry’s recent GDP downgrade to 2.8%, from the previous 4.5% projection made in October 2020. The central bank added that Thailand’s economic recovery will depend on four key drivers: (1) foreign tourist figures, (2) efficacy and coverage of COVID-19 vaccination, (3) continued and sufficient fiscal support, and (4) condition of the labour market.”

“In all, we keep our call for BOT to leave its benchmark rate unchanged at 0.50% for the whole of 2021. Still, Thailand’s economic growth is likely to be uneven, amid pronounced downside risks should COVID-19 worsens. Should macroeconomic fundamentals stay unexpectedly subdued into 2H21, a 25 bps rate cut could materialise then.”