Thailand's central bank left its key interest rate unchanged for a 12th straight meeting on Wednesday, saying policy was loose enough to support the economy while inflation was not a threat. The Bank of Thailand, however, saw greater risks to the economy from political developments in the United States, a fragile global recovery and a possible slowdown in tourism.
Southeast Asia's second-largest economy has been hit by three years of falling exports, sluggish consumption and high household debt. The junta has ramped up spending this year to bolster growth and there are now signs that trade is picking up. The central bank's Monetary Policy Committee (MPC) voted unanimously to keep the one-day repurchase rate at 1.50 percent, as widely expected. The rate has been at that level since April 2015, a quarter-point above the record low.
"The Committee saw the need to preserve policy space given that the Thai economy would still be facing greater uncertainties going forward, particularly the fragile global economic recovery and uncertainties in the monetary policy directions of major advanced economies that might induce greater capital flow and exchange rate volatility," the MPC said.
ANZ and other economists expect policy to remain accommodative through 2017. "We think there won't be any more rate cuts this year as this window has closed for quite some time after commercial banks cut their interest rates earlier this year," said Charnon Boonnuch, senior economist at Tisco Securities. All 21 economists polled by Reuters had expected no policy change. Thailand has one more meeting this year on December 21.
Assistant Governor Jaturong Jantarangs told a new conference the economy was expected to grow close to the previous forecast of 3.2 percent this year, though there were greater downside risks to growth. Last year's growth was 2.8 percent.
The central bank now predicted exports - worth about two-thirds of the economy - would perform better than a 2.5 percent contraction previously projected, Jaturong said. He added that more uncertainty in global trade could also be expected after Republican Donald Trump won the US presidential election. The United States has been Thailand's biggest export market this year, taking 11.4 percent of Thai shipments.
Thailand has struggled to regain traction since a coup in May 2014 ended months of political turmoil. One bright spot has been tourism - accounting for about 10 percent of GDP - but even that sector may slow on cutbacks in entertainment since the death of King Bhumibol Adulyadej on October 13.