By Orathai Sriring and Kitiphong Thaichareon
BANGKOK (Reuters) – Thailand’s central bank left its benchmark interest rate unchanged at a record low on Wednesday, while it cut its growth forecasts for this year and next as exports take a hit from the Sino-U.S. trade war and a strong baht.
The Bank of Thailand’s (BOT) monetary policy committee (MPC) voted unanimously to keep the one-day repurchase rate
The BOT trimmed its 2019 GDP growth forecast to 2.5% from 2.8% estimated in September and lowered its 2020 growth outlook to 2.8% from 3.3% on heightened external risks. Last year’s growth was 4.1%.
Exports, a key driver of economic growth, are now expected to shrink 3.3% this year, compared with a 1% fall seen earlier. Next year’s exports are expected to rise by a smaller 0.5%, rather than 1.7%.
“The Thai economy would expand below its potential and below the previous forecast, mainly as merchandise exports had contracted more than the previous assessment and were projected to recover more slowly than expected,” the central bank said in a statement.
Southeast Asia’s second-largest economy is facing flagging growth, below-target inflation, a climbing baht, risks to financial stability and falling consumer confidence.
Capital Economics said in a research report that it expects the central bank to ease once more in this cycle, with rates being lowered to just 1.0% by early next year.
Thammarat Kittisiripat, economist at Tisco Group, also expected a further quarter-point cut next year, as he saw growth of just 2.6% next year and limited government spending.
The MPC committee said in a statement the current policy rate remains accommodative for growth and supports prices moving toward the central bank’s target – currently 1-4%.
The central bank cut its forecasts for headline inflation in 2019 to 0.7% from 0.8% previously, and to 0.8% from 1.0% for 2020.
The BOT also expressed concern about the strength of the baht
All 16 analysts in a Reuters poll predicted no policy change.
In November, the MPC voted 5-2 to cut the rate by a quarter point after surprisingly delivering a similar reduction in August, the first easing since April 2015.
Thailand’s economy expanded less than expected in the July-September quarter, as exports were weak..
To bolster the economy, the government this year launched $10 billion in stimulus plus additional steps, and the finance minister said more can be done if needed.
(Additional reporting by Satawasin Staporncharnchai; Editing by Jacqueline Wong)