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Thailand central bank to lower growth outlook, still has scope to support economy

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Thailand central bank to lower growth outlook, still has scope to support economy

By Orathai Sriring and Kitiphong Thaichareon

 

2019-11-13T161946Z_1_LYNXMPEFAC1SY_RTROPTP_4_THAILAND-ECONOMY-CENBANK.JPG

Thailand's Central Bank Deputy Governor Mathee Supapongse, smiles during an interview with Reuters at the Bank of Thailand in Bangkok, Thailand, November 13, 2019. REUTERS/Orathai Sriring

 

BANGKOK (Reuters) - Thailand's central bank will lower its economic growth forecasts for this year and next, a deputy governor said on Wednesday, and still has monetary policy space for action to support the economy despite cutting its key interest rate to a record low.

 

Southeast Asia's second-largest economy is not in a crisis, however, as the country's economic fundamentals and banks remain strong, said Deputy Bank of Thailand Governor Mathee Supapongse.

 

The central bank will review its 2019 and 2020 economic growth forecasts - currently at 2.8% and 3.3%, respectively - at its next monetary policy meeting on Dec. 18.

 

"They will likely come down, but by how much will depend on latest economic data at that time," Mathee told Reuters in an interview.

 

Thai exports have been hit by global trade tensions and the strength of the baht - Asia's top performing currency this year - has further put pressure on the trade-reliant economy.

 

Last week, the BOT's monetary policy committee (MPC) cut its policy rate <THCBIR=ECI> by 25 basis points to 1.25%, a record low last seen during the global financial crisis.

 

"Monetary policy is data-dependent. Our rough forecasts suggested growth and inflation would be less than expected, so the committee thought monetary policy should be eased further," Mathee said.

 

He added that the MPC had got "ahead of the curve" by acting before official third-quarter gross domestic product (GDP) data is released next Monday by the state planning agency.

 

Although July-September growth is expected to be lower than the BOT's forecast, it should be higher than the second quarter's 2.3% pace, which was the weakest in nearly five years, and there should be no quarter-on-quarter contraction, he said.

 

To view a graph on Thailand's Policy rate, CPI and GDP, click Thai%20policy%20rate,%20GDP%20and%20CPI.

 

Last week's rate cut, the second in three months, prompted commercial banks to lower borrowing costs, and Mathee said that should help the economy, purchasing power and inflation.

 

Although the policy rate is now at a record low of 1.25%, there is still room to help the economy if necessary, said Mathee, who is a member of the central bank's policy committee.

 

"I think it's not a limitation that we have reached the bottom already," he said, adding that Thailand had no need to cut the key rate to zero, as other measures and fiscal policy were also helping.

 

The BOT is still concerned about the baht's strength, although there is no evidence of speculation in the currency, he said.

 

The baht weakened after the rate cut and the BOT's further relaxations on rules to encourage capital outflows.

 

But it has still risen 7.6% against the dollar so far this year, sustained by Thailand's hefty current account surplus.

 

The BOT will also cut its forecasts for headline inflation for this year and next, currently 0.8% and 1.0%, respectively, said Mathee, though he added Thailand was not expected to face deflation.

 

Headline inflation was just 0.11% in October, the lowest in 28 months and far below the BOT's 1-4% target range, which is being reviewed.

 

(Additional reporting by Satawasin Staporncharnchai; Editing by Alex Richardson)

 

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-- © Copyright Reuters 2019-11-14
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As we have noted before, Thailand has a high speed rail project in the works, with ChiComs as the main creditors.  The sticking point—China has offered to accept payment in USD—and Bank of Thailand has billions in reserve, but refuses to use them for payment.  It makes you wonder...

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So how much did the Baht go up when this announcement was made, lmao?

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Never confuse effort with results.  MORE action is needed ... the Baht is not getting weaker!  Thailand (an agricultural exporter) can not compete or grow with a strong Baht ... and yes ... tourism and retirees is part of that ... so affects the Thai Visa readers.

THB Nov 14.JPG

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6 hours ago, webfact said:

Although the policy rate is now at a record low of 1.25%, there is still room to help the economy if necessary,

That might be true if the CPI is 'true.' 

But with the government's ability to manipulate consumer costs (ie., farming subsidies, price fixing and state-owned enterprise monopolies) the CPI might in fact be much higher and, thus, the monetary policy far less sufficient to control inflation. 

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Seems to me reports such as this are coming weekly now......:thumbsup:

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6 hours ago, webfact said:

Thailand's central bank will lower its economic growth forecasts for this year and next, a deputy governor said on Wednesday, and still has monetary policy space for action to support the economy despite cutting its key interest rate to a record low.

You're making a huge mistake, people have no more money, all those related to export are losing hits and many probably won't make it.
Instead of lowering the interest, adjust the TRUE value of the Baht!
Thailand is getting closer and closer to the chasm of recession.
This time it will be much more painful for the people than back in 1997!

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