By Orathai Sriring and Kitiphong Thaichareon
BANGKOK (Reuters) – Thailand’s central bank cut its benchmark interest rate for the third time this year to a record low as it expects a bigger annual contraction in Southeast Asia’s second largest economy due to the fallout from the coronavirus pandemic.
The Bank of Thailand’s (BOT) monetary policy committee on Wednesday cut the one-day repurchase rate by 25 basis points to 0.50%, as expected, the fifth reduction in borrowing costs since August.
“The Committee assessed that the Thai economy would contract in 2020 more than the previous assessment due to the more-than-expected contraction of the global economy along with the containment measures worldwide,” the central bank said in a statement.
A coronavirus outbreak has prompted many countries to impose strict lockdowns this year crippling global economic activity. In Thailand, the central bank forecast in March the economy would shrink 5.3% in 2020 – the worst contraction since the 1997-98 Asian financial crisis.
The committee voted 4-3 in favour of the rate reduction, with most members saying it would further shield the economy which has already benefited from billions of dollars worth of fiscal and financial measures. The three dissenters favoured no policy change.
The central bank would monitor developments in economic growth, financial stability and the coronavirus impact among others and stood ready to “use additional appropriate monetary policy tools if necessary”, according to the statement.
“With the policy rate now not much above zero, the central bank will soon need to turn its attention to non-conventional policy options,” Gareth Leather at Capital Economics said in a research note.
The committee also expressed concern over the strength of the local currency, the baht, which it said could affect an economic recovery.
Sixteen out of 18 economists in a Reuters poll had predicted a quarter-point cut.
Central banks globally have taken measures to support their economies to protect them against the damage from the global pandemic, which has infected more than 4.8 million globally and over 3,000 people in Thailand.
(Additional reporting by Satawasin Staporncharnchai; Editing by Ana Nicolaci)