(Bloomberg) – Thailand’s central bank will likely keep its benchmark interest rate unchanged on Wednesday to support an emerging economic recovery as the omicron coronavirus variant threatens the outlook.
The 20 economists polled by Bloomberg expect the Bank of Thailand to keep the policy rate at an all-time high of 0.5% for the 13th meeting in a row. The central bank will also release the latest economic forecasts for this year and next.
Thailand was counting on an increase in the vaccination rate, an easing of trade restrictions and a wider reopening to foreign tourists to bolster the economic recovery after a slowdown in the third quarter. But as the fast-spreading omicron variant emerges as a risk to the recovery, Governor Sethaput Suthiwartnarueput said last week that the central bank would focus on helping economic growth amid subdued inflation, and is less concerned about the actions of the US Federal Reserve.
“The central bank will probably wait and see the situation as omicron has clouded the economic outlook,” said Burin Adulwattana, chief economist at Bangkok Bank Pcl. “Tightening of rates is unlikely before 2023. The economic scars of the epidemic will take a few years to heal, which will require the continuation of an accommodative monetary policy.”
Here’s what to look for in Wednesday’s decision:
The central bank is likely to increase its forecast for gross domestic product growth for 2021 from the 0.7% it forecast in September, after a more moderate 0.3% contraction than expected in the last quarter. The state’s planning agency released its own forecast separately last month, estimating GDP growth of 1.2% this year and 3.5% to 4.5% in 2022.
Sethaput said last week that the BOT sees some “uptick” in its forecast for GDP growth this year, but 2022 is fraught with uncertainties, especially from omicron.
Thailand on Tuesday suspended entry without a quarantine of visitors until January 4 due to the increase in imported cases of the strain. Health Minister Anutin Charnvirakul said on Monday the government had discovered 63 cases of omicron and 20 more awaiting results. All but one are imported cases.
The weakness of the baht
The baht has weakened more than 10% against the dollar since the start of the year, the worst performance among major Asian currencies tracked by Bloomberg. The weak currency helped boost Thailand’s competitiveness in exports, which jumped 24.7% in November.
The governor said BOT was not aiming for a “set level” for the baht and that the currency was determined by fundamentals. The monetary authority will always ensure that the currency is not too volatile to threaten the country’s economic recovery after the pandemic.
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