Thailand: BoT cuts 2021 GDP rise to 0.7% and keeps policy rate

  • The BoT’s Monetary Policy Committee (MPC) meeting on 4 Aug 21 decided to cut GDP growth forecast for 2021 to 0.7% from 1.8% in Jul 21.
  • In addition, the Thai economy for 2022 was projected to expand 3.7%, a decline from its previous forecast of 3.9%.
  • The committee also voted four to two to maintain the policy rate at 0.50%. Two members voted to cut the policy rate by 0.25 percentage point. One MPC member was unable to attend the meeting.
  • Given that the economy in 2021 would be affected by the Covid-19 outbreak more than expected with significant downside risks, the MPC decided to cut the growth forecast.
  • The committee has factored in both negative and positive factors, but the committee views that economic outlook would face higher downside risks, said MPC secretary Titanun Mallikamas.
  • For positive factors, the government’s additional subsidy and stimulus measures would support Thailand’s economy by 0.4%, and recovering exports would also contribute 0.1% to GDP, he added.
  • Given negative factors, Thailand’s growth rate is expected to be lower than expected and hurt GDP growth by 0.2%, while the prolonged outbreak and harder impact would impact GDP by 1.1%. Moreover, the delay in the country’s reopening and declining foreign tourists’ confidence would also impact the economy by 0.3%.
  • Mr Titanun said the MPC views that fiscal and financial measures must be expedited to assist affected groups in a more focused and timely manner in line with the current situation.
  • “Most members viewed that financial measures would be more effective than a further reduction in the policy rate which was already low,” he said.

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