Bank of Thailand holds key rate at 0.5% to support struggling economy

Bangkok

THAILAND'S central bank left its key interest rate unchanged at a record low on Wednesday, as widely expected, to support the economy as the South-east Asian country struggles with its biggest wave of Covid-19 infections to date.

The worsening outbreak has hit economic activity, which is heavily reliant on tourism and trade. Stricter containment measures imposed in July have been extended with lockdown areas expanded, though increased exports and fiscal measures have lent some support.

The Bank of Thailand's (BOT) monetary policy committee voted 4-2 to hold the one-day repurchase rate at 0.5 per cent for a 10th straight meeting. The two dissenters voted for a quarter point cut to help support the economy. It was the first split decision since a rate cut in May 2020. One member was absent.

All 18 economists in a Reuters poll had expected the BOT to stay on hold after three rate reductions in 2020 to ease the impact of the pandemic.

The BOT said in a statement that monetary policy will remain accommodative to support the economy, which it said is facing significant downside risks. Most committee members felt the rate was already low and felt financial measures would be more effective in helping the economy than cutting the key rate.

The latest Covid-19 outbreak started in April and has accounted for most of total cases and deaths since the start of the pandemic. It came as Thailand was preparing to reopen more broadly to foreign visitors later this year to revive the struggling tourism sector.

On Thursday, the central bank said it was again downgrading its growth forecast for this year to 0.7 per cent from 1.8 per cent predicted in June, and now expects just 150,000 foreign tourists.

For 2022, it also cut its growth outlook to 3.7 per cent from 3.9 per cent.

Thailand on Wednesday reported 20,200 new coronavirus cases and 188 additional deaths, both the highest daily increases so far during the pandemic.

The new cases and fatalities brought total infections to 672,385 and deaths to 5,503, data from the health ministry's website showed. Only about 15 per cent of the population has been fully vaccinated so far. REUTERS