The Bank of Thailand (BOT), which cut its rate by 50 basis points last year, added that inflationary pressures remain low and inflation remains in negative territory due to the fall in oil prices around the end of 2015.
After falling from April to September 2015, the baht has been appreciating since mid-January, a move the BOT said "might not be as conducive the the economic recovery as it could be."
The baht was trading at 35.13 to the U.S. dollar today, down sharply from 34.9 yesterday, but still up by 2.5 percent since the start of this year.
The central bank's governor, Veerathai Santiprabhob, said earlier this month that the BOT was planning to lower its growth forecast for this year from 3.5 percent projected in December due to increased downside risks.
BOT's monetary policy committee reviewed the new forecast at its meeting but will first publish it on March 31. In December the 2016 growth forecast was cut to 3.5 percent from 3.7 percent.
Thailand's Gross Domestic Product grew by a larger-than-expected annual rate of 2.8 percent in the fourth quarter of last year, down from 2.9 percent, for full-year growth of 2.8 percent.
The BOT said public expenditure, tourism and higher investment by certain businesses was supporting economic activity but "overall economic momentum slowed" as the effects of the government's tax rebate measures and accelerated car purchases prior to this year's increase in taxes had dissipated.
Exports were also continuing to contract "markedly" and were only likely to recover slowly.
Thailand's exports fell by 8.9 percent in January to US$15.710 billion, the 13th month of decline and the biggest drop since November 2011.
Thailand's headline inflation rate fell by 0.5 percent in February, the 14th consecutive month of deflation. In December the central bank lowered its forecast for 2016 inflation to 0.8 percent from a previous 1.2 percent, well below its target of 2.5 percent, plus/minus 1.5 percentage points.
The Bank of Thailand released the following statement:
"The Committee voted unanimously to maintain the policy rate at 1.50 percent.
Key considerations for policy deliberation are as follows.
The Thai economy continued to gradually recover on the back of public expenditure, tourism, and expansion in investment of certain businesses. However, the overall economic momentum slowed, following dissipation of the effect of the government’s tax rebate measure around the end of last year and of the accelerated car purchase prior to the increase in vehicle excise tax this year.
Meanwhile, merchandise export value contracted markedly and looked to recover slowly due to a slowdown in major trading partners’ economies, shifting global trade structure, and Thailand’s declining export competitiveness. Therefore, the economic growth forecast was revised down from the assessment at the previous meeting. In addition, risks to growth might arise from a fragile recovery of the global economy and monetary policy divergence among advanced economies, which could influence capital flows and exchange rate movements, and had already caused the baht to strengthen during some recent periods, which might not be as conducive to the economic recovery as it could be.
Headline inflation continued to stay in the negative territory due to a fall in global oil prices around the end of 2015. As a result, inflationary pressure remained low. Core inflation slowed once excluding the one-off rise in tobacco and vehicle excise taxes, reflecting lower demand-side support.
Inflationary risks hence skewed more towards the downside. Meanwhile, risks to financial stability from search-for-yield behavior continued to warrant close monitoring. "
www.CentralBankNews.info
Key considerations for policy deliberation are as follows.
The Thai economy continued to gradually recover on the back of public expenditure, tourism, and expansion in investment of certain businesses. However, the overall economic momentum slowed, following dissipation of the effect of the government’s tax rebate measure around the end of last year and of the accelerated car purchase prior to the increase in vehicle excise tax this year.
Meanwhile, merchandise export value contracted markedly and looked to recover slowly due to a slowdown in major trading partners’ economies, shifting global trade structure, and Thailand’s declining export competitiveness. Therefore, the economic growth forecast was revised down from the assessment at the previous meeting. In addition, risks to growth might arise from a fragile recovery of the global economy and monetary policy divergence among advanced economies, which could influence capital flows and exchange rate movements, and had already caused the baht to strengthen during some recent periods, which might not be as conducive to the economic recovery as it could be.
Headline inflation continued to stay in the negative territory due to a fall in global oil prices around the end of 2015. As a result, inflationary pressure remained low. Core inflation slowed once excluding the one-off rise in tobacco and vehicle excise taxes, reflecting lower demand-side support.
Inflationary risks hence skewed more towards the downside. Meanwhile, risks to financial stability from search-for-yield behavior continued to warrant close monitoring. "
www.CentralBankNews.info
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