(Bloomberg) -- The Bank of Thailand held its benchmark interest rate steady at an all-time low to support an economy that’s taking the biggest knock in Asia related to the coronavirus pandemic.
The central bank kept its policy rate at 0.5% on Wednesday in a unanimous decision. All but two of the 26 economists in a Bloomberg survey predicted a hold after three rate cuts earlier this year.
Southeast Asia’s second-largest economy is forecast to contract the most on record this year, shrinking 8.1%, with any recovery taking as long as almost two years, according to outgoing central bank Governor Veerathai Santiprabhob. The economic damage could reach as much as 3 trillion baht ($96.7 billion) because of the hit to Thailand’s growth drivers, tourism and exports.
With the policy rate hovering close to zero, the central bank is running out of conventional monetary policy space to spur the economy and boost prices as deflation sets in. The bank has said it’s studying options like large-scale asset purchases and some form of yield-curve control.
At the same time, authorities are worried about the currency’s gains, which threaten to undermine any recovery in exports. The baht has gained more than 4% against the dollar in the past three months, the best performer in Asian currencies tracked by Bloomberg.
The country is in the middle of installing a new economic team, including a new central bank governor and finance minister. Sethaput Suthiwart-Narueput, a member of the Bank of Thailand’s Monetary Policy Committee, was named last week as a successor to Veerathai, who will leave his job after his term expires in September.
While Thailand has had relative success in containing the virus outbreak, the government has extended the country’s state of emergency for a fourth time, by one month through Aug. 31, to prevent a second wave of infections.
©2020 Bloomberg L.P.
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