Thai economy faces gloomy prospect
The Thai economy shows a gloomy outlook for the rest of 2020, according to the central bank’s Monetary Policy Committee (MPC).
The 24 June MPC meeting resolved unanimously to keep the benchmark interest rate unchanged at 0.50 per cent. The economy will be worse than expected and key indicators are revised to reflect the foreseeable adverse impacts from the Covid-19 pandemic.
MPC secretary Titanun Mallikamas announced that Thailand might pose economic contraction and worsening economic indicators due mainly to the continuing global coronavirus slump, the impacts from business shutdown and new ways of livings and doing business, the high uncertainties to economic system infrastructure. Hence, the unchanged benchmark interest rate at 0.50% is deemed appropriate in view of gradual recovery expectation following the relaxation of lockdown measures, target inflation rate tends to be more negative than expected and might be back to target level in 2021, the government’s stimulus supports in various forms through both monetary and fiscal policies.
Key economic indicators are also revised such as 2020 GDP is forecasted to record 8.1 per cent negative from the previous year, against Mar 2020 forecast at 5.3 per cent negative. However, it is expected that 2021 GDP will turn into 5 per cent growth (against Mar 2020 forecast at 3 per cent growth) due to the recovery in overall business sectors, the tourism industry and those mega projects to be injected and boosted up. Export volumes in 2020 is forecasted to record its 130-month lowest of 22.7 per cent negative, due mainly to the Covid-19 negative impacts globally. Import volumes in 2020 tends to record 18.9 per cent negative from the previous year.
In short term view, the commercial bank’s interest rates and government bond yield tends to lower in line with the central bank’s benchmark rate while the gap between corporate bond yield and govt bond yield remains high. Overall liquidity in the financial market remains high on the back of higher loans granted to large corporates while SMEs and retail consumer loans are selectively restricted. On exchange rate side, Thai baht appreciation against the US dollar is derived from the US dollar depreciated against those main currencies and regional currencies. The central bank needs to closely monitor and implement necessary measures to manage the currency exchange.
