Thailand cuts rates as spreading virus puts Asia central banks on guard
By Orathai Sriring and Kitiphong Thaichareon
BANGKOK (Reuters) – Thailand’s central bank unexpectedly cut its benchmark interest rate for a third time in six months on Wednesday, taking it to a record low as a virus spreading from China puts further pressure on the struggling economy.
“The Committee viewed that the Thai economy would expand at a slower rate in 2020 than previously forecasted and much further below its potential,” the MPC said in a statement.
The virus outbreak, a drought and a delay in passing the fiscal budget would affect a large number of businesses and employment, it said.
The Bank of Japan’s deputy governor said earlier on Wednesday that it stands ready to ramp up stimulus if the economy is derailed, while several others have said they are closely monitoring the situation. The Philippines is expected to lower borrowing costs on Thursday.
The unanimous decision to cut the rate “underscores the severity and urgency of economic challenges,” said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.
Charnon Boonnuch, an economist at Nomura in Singapore, said he expected the BOT to pause after three rate cuts of 75 basis points in this cycle.
“However, we see some room for more easing this year if growth continues to disappoint. There is still some room for the BOT to cut,” he added.
In a Reuters poll, 14 of 23 economists had predicted no rate change on Wednesday while the others forecast a quarter-point cut.
The BOT had cut the rate by a quarter-point each in August and November but left it unchanged in December.
(GRAPHIC: Thailand’s Policy rate, GDP and CPI – https://fingfx.thomsonreuters.com/gfx/mkt/13/1387/1366/Thai%20policy%20rate,%20GDP%20and%20CPI.png)
Titanun did not answer when asked whether there was room to cut rates further.
The virus outbreak – which has sickened thousands in China and killed nearly 500 people – has compounded problems for Southeast Asia‘s second-largest economy as its exports have been weak amid global trade tensions.
Thailand may see 2 million fewer Chinese tourists than last year’s 11 million, according to the Tourism Authority of Thailand. China is Thailand’s biggest source of tourists, making up 28% of the total last year.
A joint standing committee of industry, banking and commerce said on Wednesday the country’s tourism earnings may tumble by 108 billion baht to 220 billion baht ($3.47 billion-$7.08 billion) if the outbreak lasts for 3-6 months.
It also slashed its 2020 economic growth forecast to 2.0%-2.5% from 2.5%-3.0% projected last month.
In addition, some investments have been stalled due to delays in the 3.2 trillion baht budget, which is now pending a court ruling on its validity.
(GRAPHIC: Thailand’s growth VS regional peers – https://fingfx.thomsonreuters.com/gfx/mkt/12/8807/8721/Thai%20growth%20VS%20regional%20peers.png)
(Additional reporting by Satawasin Staporncharnchai; Editing by Kim Coghill)