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Thai central bank holds key rate as economy recovers from COVID-19 slump

Orathai Sriring

Sep 29, 2021

Thailand's central bank left its key interest rate unchanged at a record low and maintained its 2021 economic growth forecast on Wednesday, saying a relaxation of pandemic curbs and a steady vaccine rollout will help the recovery.

Thailand's worst coronavirus outbreak led to restrictions in July and August, but the curbs have since been relaxed and the Southeast Asian country will soon reopen to more vaccinated visitors.

The Bank of Thailand (BOT) maintained its 2021 economic growth outlook at 0.7%, and said it expected 200,000 foreign tourists this year.

For 2022, it raised its growth outlook to 3.9% from 3.7% forecast in August, and predicted 6 million foreign visitors.

While uncertainties surrounding the economic outlook remained high, "progress on vaccination and earlier-than-expected relaxation of the containment measures would help support the economy in the period ahead," the BOT said in a statement after its policy meeting.

The BOT's monetary policy committee unanimously voted to hold the one-day repurchase rate at 0.50% for an 11th straight meeting after three reductions in 2020 to mitigate the impact of the COVID-19 pandemic.

Twenty of 23 economists in a Reuters poll had expected the BOT to stay on hold while the others predicted a quarter-point cut.

"We are taking out the rate cut we originally had pencilled in for this year. But the poor state of the economy means rate hikes are a long way off," Capital Economics said in a report.

The BOT said monetary policy will remain accommodative and that fiscal measures must be expedited to support the recovery.

"The committee viewed that financial measures would be more effective than a further reduction in the policy rate, which was already low," the BOT said.

The BOT recently said it backed the government's increased public debt ceiling for more fiscal flexibility to support Southeast Asia's second-largest economy.

The central bank said it would closely monitor the baht. The currency, emerging Asia's worst performer, has depreciated about 11% against the dollar so far this year.

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