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Bank of Thailand may cut policy rate again as virus risks mount
[BANGKOK] A slim majority of economists expect Thailand to cut its benchmark interest rate to a new low on Wednesday, a Reuters poll showed, after slashing it in a surprise meeting last week to mitigate the hit to its economy from the coronavirus outbreak.
Ten of 19 economists in the poll predicted the Bank of Thailand's (BOT) monetary policy committee would cut its one-day repurchase rate by 25 basis points to 0.50 per cent - which will be the fifth reduction in borrowing costs since August.
The rest forecast it would keep the rate at 0.75 per cent, the lowest on record.
Late on Friday, the BOT cut the rate by a quarter point after a surprise meeting, saying the impact of the respiratory disease would be more severe than previously expected and would severely affect the Thai economy.
However, Charnon Boonnuch, economist at Nomura in Singapore, said he expected another 25 basis point cut this week "given the sharp deterioration in the growth outlook and that a 25 bp cut at a special meeting is unlikely to be sufficient".
Some analysts said after cutting the rate by 100 basis points in the past year, the BOT might want to monitor developments before reducing the rate further later this year.
"Despite the benchmark rate now being at record lows, we expect the central bank to deliver two more rate cuts of 25 bps each in Q2 and Q3 respectively," DBS said in a research report.
Friday's policy rate cut has led some banks to reduce their lending rates. The BOT recently said it had injected more than 100 billion baht (S$4.42 billion) by buying bonds and would ensure sufficient liquidity in the market. It also announced measures to support the debt market.
The BOT will offer updated economic forecasts after the meeting; it is expected to slash its 2020 growth forecast from 2.8 per cent. Some analysts expect the economy to contract this year.
Tourism is a key growth driver for Thailand, which is considered one of the economies most vulnerable to the virus in Southeast Asia due to its heavy reliance on Chinese tourists and China trade.
Thailand has reported 721 coronavirus cases and one death.
Even before the outbreak, Southeast Asia's second-largest economy has been hit by falling exports, weak investment caused by a delayed budget, and a drought. Last year's growth was just 2.4 per cent, the lowest in five years.