Thai recovery fragile, policy space should be 'preserved': central bank

[BANGKOK] Thailand's monetary policy committee, which held rates steady on June 10, felt that "policy space" should be preserved as downside risks to growth remained and economic recovery was "fragile", minutes from that meeting showed on Wednesday.

On June 10, the committee - with three members from the Bank of Thailand plus four others - unanimously voted to keep the one-day repurchase rate unchanged at 1.50 per cent.

At each of the two previous meetings in March and April, the committee surprisingly cut rates by 25 basis points to try to lift Southeast Asia's second-largest economy.

"As there remain downside risks to growth from both external and domestic sources, the committee considered that the policy space should be preserved to address those downside risks," the minutes from June 10 said.

"The economic outlook was projected to improve gradually,"as government spending and tourism should maintain its momentum. But "the economic recovery remains fragile", the minutes said.

Households remained cautious in their spending, due mainly to sluggish income growth and continued strict credit standards, they said.

The minutes said the committee judged that "the conduct of monetary policy had thus far eased monetary conditions, while the direction of exchange rate movement had become more conducive to the economic recovery." The baht has weakened about 2.7 per cent against the dollar since the March 11 rate cut.

At the June meeting, the MPC decided to cut its economic growth forecast for this year to 3.0 per cent from 3.8 per cent and export estimate to a 1.5 per cent fall from an 0.8 per cent rise seen previously.

One year after the military seized power to end political unrest, the junta has still struggled to revive stubbornly weak domestic consumption and exports.

Economic growth last year was just 0.9 per cent, the weakest since flood-hit 2011.

The committee next meets on Aug. 5.

REUTERS