BANGKOK: The Bank of Thailand cut its benchmark interest rate to a record low as the coronavirus outbreak, a stalled government budget and bad drought imperil economic growth.
The central bank lowered the policy rate by 25 basis points to 1% on Wednesday in a unanimous decision, the third cut in the last five meetings. Fourteen of 29 analysts in a Bloomberg survey predicted the decision, with the rest expecting no change.
"The cutting of the rate will aid the current economic situation,” Bank of Thailand Assistant Governor Titanun Mallikamas told reporters.
The baht accelerated losses following the rate reduction and weakened as much as 0.9% against the dollar. It traded down 0.7% at 31.180 as of 2:08 p.m. in Bangkok.
The virus outbreak has delivered a severe blow to Thailand’s tourism industry, undermining the outlook for the economy. Officials already were grappling with the worst drought in four decades, a prolonged delay in the implementation of the 3.2-trillion-baht ($103 billion) annual budget and shrinking exports.
"The outbreak may be temporary, but it’s a huge shock to the economy,” Naris Sathapholdeja, chief economist at TMB Bank Pcl in Bangkok, said before the decision. "Cutting borrowing costs helps to alleviate the pressure on the private sector.” Data out earlier Wednesday showed confidence among Thai consumers falling for an eleventh straight month in January -- even before the coronavirus scare had much time to impact the economy.
The government said last week it will consider new initiatives to support the economy. The ruling coalition has announced more than $10 billion of stimulus steps over the past few months. - Bloomberg
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