Thai central bank says GDP may be worse than expected next year

[BANGKOK] Thailand's gross domestic product could underperform next year if tourism remains weak, even as this year's economic performance may beat sharply reduced forecasts, the country's central bank head said Friday.

All reasonable policy options are on the table in such a situation, although there's currently no need for the central bank to pursue quantitative easing, Bank of Thailand Governor Sethaput Suthiwart-Narueput told reporters at a briefing in Bangkok. Monetary policy will remain accommodative and focused on growth, while fiscal stimulus should remain in place until the middle of next year, Mr Sethaput said.

"Monetary policy gives priority to growth now," he said. "We see that financial stability is linked to the revival of growth." Thailand's economy, which is heavily reliant on exports and tourism, is expected to contract the most in more than two decades this year.

The National Economic and Social Development Council expects the economy to contract 6 per cent this year, compared to a 7.7 per cent fall seen by the Finance Ministry and the 7.8 per cent contraction the central bank predicted in September. The council has forecast 3.5 per cent-4.5 per cent expansion for next year, with the central bank expecting 3.6 per cent growth.

The Bank of Thailand may need to revise its forecast after third-quarter GDP came in better than expected, Mr Sethaput said. The Monetary Policy Committee will meet Dec. 23 to review the forecast.

Thailand's borders reopened to some foreign tourists in October for the first time since late March. The 2021 GDP forecast assumes 9 million tourists will arrive next year, which might be optimistic, Mr Sethaput said.

"We shouldn't be complacent about the outbreak and we shouldn't lift the stimulus for consumption too quickly. It's still necessary until we have vaccine," he said. "Even if we have the vaccine, it doesn't mean tourists will come back right away." On top of the blow from the pandemic, the baht currency hit a 10-month high against the US dollar in November, raising concerns for exports.

"The economic recovery is fragile, so we don't want anything to obstruct it," Mr Sethaput said Friday. "Baht strength would hurt the margins of exporters, especially small ones, at a time when they're facing rising debts and lower orders." The central bank last month relaxed rules on capital outflows and said it would scrutinise fund flows into bonds to help cool the baht rally. Last week, Finance Minister Arkhom Termpittayapaisith said those measures would likely be followed by "further strict" steps.

In minutes from the latest monetary policy meeting, the central bank said it's appropriate to consider whether additional measures will be needed on the baht.

So far, the bank's new measures have failed to cool the currency, with the baht still up more than 8 per cent from the year's low in April.

BLOOMBERG