Thailand holds rate, trims GDP, export forecast

by **Cals** Thu 17 Oct 2013, 01:22

Published: Wednesday October 16, 2013 MYT 4:29:00 PM
Updated: Wednesday October 16, 2013 MYT 5:33:31 PM
Thailand holds rate, trims GDP, export forecast
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Thailand's central bank is further revising down its growth and export forecasts, with the new projections to be released on Oct 25, after it chopped growth projection in July to 4.2% from 5.1%.
BANGKOK: Thailand's central bank on Wednesday left its benchmark interest rate at 2.5%, a level it continues to feel is low enough to help the economy escape recession.

The Bank of Thailand (BoT) said the rate is "still appropriate".

It said the economy, which slipped into a mild recession in April-June quarter, is stabilising, but growing slower than expected.

The central bank said it revised down its growth and export forecasts at the meeting but the new projections will be released on Oct 25. In July, the growth projection was chopped to 4.2% from 5.1%.

The Thai Finance Ministry predicts 3.7% growth for this year and the Asian Development Bank recently forecast 3.8%.

All but one of 18 economists polled by Reuters had expected the BoT's monetary policy committee (MPC) to hold the one-day repurchase rate on Wednesday, as it did at the past two meetings. One economist predicted a 25 basis point cut.

The MPC voted 6-0 for no change. One member who is resigning from the committee after being named BoT board chairman was absent.

In a statement after the meeting, the MPC said the outlook "points to a gradual growth recovery, supported by accommodative financial conditions."

The benchmark rate has been steady since May, when it was cut 25 basis points due to poor growth data plus political pressure to tame a then-strong baht.

The baht barely moved after the central bank decision. At 0804 GMT, it was at 31.25 to the dollar, compared with Tuesday's close of 31.27. At a peak in April, the baht was at 28.50 to the dollar.

AWAITING Q3 GDP NUMBER

Usara Wilaipich, a senior economist at Standard Chartered bank, said she expects the BoT to reduce its 2013 GDP growth forecast only slightly, to around 3.8-4%.

She also said she "continues to expect the BOT to hold the rate at 2.5% at least until end-Q2 2014".

However, Thammarat Kittisiripat, economist at TMB Bank in Bangkok, did not rule out a rate cut after third-quarter GDP data comes out on Nov 18. If the data is bad, the MPC at its meeting on Nov 27 "will probably decide to cut the rate by 25 bps to underpin growth, amid low inflationary pressure."

Thailand's inflation rate is around a four-year low. While the country currently is having some flooding, the impact has been limited and should not be anything like devastating 2011 floods that slashed economic growth that year to 0.1%.

Last week, Indonesia held its benchmark reference rate for the first month since May after data eased pressure on the rupiah. The pause came after a rate hike of 150 basis points, to 7.25%, between June and September to battle inflation and support the rupiah – Reuters.