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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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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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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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1 hour ago, 30la said:

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!

 

And who decides the "true' value of the ThB - You or the Forex Money Markets?

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6 hours ago, spidermike007 said:

Considering how low the fed rate is, it is rather astonishing how high rates are to borrow money in Thailand. The spread seems higher than with most nations. No wonder the banks are so profitable. And despite these high rates, they are still ridiculously conservative.

A bank worker told me it was because of high defaults~so people that pay back the bank have to pay for the people that don't~you know~the land of no accountability, a baby coddle culture, and no enforcement...

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9 hours ago, FinChin67 said:

I believe the strong bath and much lower income from tourists will hit Thailand pretty hard. On top of that China is feeling the pain from the trade war and it will affect Thailand which depends on China. Manufacturing (incl. me) is moving out from China but not to Thailand.. (Vietnam, Indonesia and even back to Europe). Car industry is choking in China and I am sure in Thailand as well.

 

What they are going to do about it is the big question mark. So far nothing..

 

China’s 2020 growth to drop below 6.0 per cent, says government-linked body
https://www.scmp.com/economy/china-economy/article/3037562/chinese-think-tank-becomes-first-government-linked-body

We used to have a strong bath when I was a child - made of zinc I believe, and used it in front of a coal fire!

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3 hours ago, Redline said:

A bank worker told me it was because of high defaults~so people that pay back the bank have to pay for the people that don't~you know~the land of no accountability, a baby coddle culture, and no enforcement...

Funny you should say that ,but on our estate houses are between 5 an about 9 million , there is one quite large one that has been on sale for about 4 years ,most sell fairly well ,i rang the bank who had a board outside to see how much they wanted 29 million ,you heard right ,29 million ,wonder why it has not sold?its quite large ,😟

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The Fed lowers interest rates in order to stimulate economic growth, as lowerfinancing costs can encourage borrowing and investing. However, when rates are too low, they can spur excessive growth and subsequent inflation, reducing purchasing power and undermining the sustainability of the economic expansion......

 

100% this is not sustainable therefore the baht should be weakening and not strengthening. 

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9 hours ago, Isaan sailor said:

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...

That's the Junta's and his general mates retirement money when he gets kicked out of the job.!!!

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On 11/14/2019 at 9:01 AM, bluesea said:

All those Expats with 800K in a Thai Bank Account is also assisting to upward trend of the baht, making the economy look good.

My guess is that 800k in the bank is to support (prop up) the Thai banking sector.. each 800k deposit enables the bank to hold an 8m baht loan on its books and I dare say given the number of empty rooms a little (lot) bit of excess building has gone on and a few too many car loans (that won't be repaid)..... issues might not be too far away at all.

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