Thailand: BoT keeps rates unchanged – UOB

UOB Group’s Economist Barnabas Gan reviews the latest monetary policy meeting by the Bank of Thailand (BoT).

Key Quotes

“The Bank of Thailand (BOT) kept its one-day repurchase rate unchanged at 0.50% as widely expected for the eighth consecutive meeting on 05 May 2021. The last time it made a move was in May 2020, when the benchmark rate was cut by 25 bps. The decision to keep its policy rate unchanged was voted unanimously by all committee members.”

“Policy-makers kept its negative tone in the latest monetary policy statement, in light of the recent spike in COVID-19 infections, citing that ‘economic growth is likely to sharply slow due to the third COVID-19 wave’.”

“As expected, BOT sees downside risks to its current GDP growth outlook at 3.0% in 2021. As such, growth is expected to slow to a range of between 1.0% and 2.0% in 2021. For 2022, BOT adjusted its growth outlook to a range of between 1.1% and 4.7%.”

“The economic momentum in 2021 will depend on the pace of vaccination rollout in Thailand, which in turn will impact tourism demand.”

“We continue to observe that policy space remains very limited, while fiscal policies will likely do the heavy lifting in supporting economic growth. In all, we keep our call for BoT to leave its benchmark rate unchanged at 0.50% for the whole of 2021. Still, Thailand’s economic growth is likely to be uneven, amid pronounced downside risks should COVID-19 worsens. Should macroeconomic fundamentals stay unexpectedly subdued into 2H21, a 25 bps rate cut could materialise then.”