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Economy

Thai interest rate unchanged but central bank cuts GDP outlook

Bank of Thailand trims 2021 growth forecast to 3.2% due to sluggish tourism

The baht's strength is having an impact on the economic recovery in Thailand, which is seeing a surge in coronavirus infections.   © Reuters

BANGKOK (Reuters) -- Thailand's central bank left its key interest rate unchanged at a record low on Wednesday but downgraded its 2021 economic outlook as the tourism-reliant country deals with a fresh outbreak of coronavirus.

Southeast Asia's second-largest economy is continuing to recover, but downside risks remain high and it needs the low policy rate, the Bank of Thailand said.

The BOT's monetary policy committee voted unanimously to keep the one-day repurchase rate unchanged at a record low of 0.50% for a fifth straight meeting, after three cuts earlier this year.

"The committee voted to maintain the policy rate at this meeting to preserve the limited policy space in order to act at the appropriate and most effective timing," the BOT said.

All but one of 13 economists in a Reuters poll had expected the BOT to remain on hold after three rate reductions earlier in the year. The other analyst foresaw a 25-basis-point cut.

With debt holiday over and asset quality concerns, the BOT might cut the rate in the next quarter, said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.

"While there is light at the end of the tunnel, we remain inside the tunnel," he said.

Raising its 2020 economic outlook to a 6.6% contraction from the 7.8% decline, the BOT cut its 2021 outlook to 3.2% growth from 3.6% seen earlier due to sluggish tourism.

It now expects 5.5 million foreign tourists next year, rather than 9 million projected previously. That compares with nearly 40 million visitors in 2019.

A cluster of COVID-19 cases was found in a province near the capital Bangkok, where it has already infected more than 1,000 people. This comes as a blow to an economy still reeling from the global impact of COVID-19.

The spread has added problems for a country already grappling with prolonged political protests, a strong baht and below-target inflation.

The BOT reiterated its concerns over the baht's strength and said it would consider measures as necessary.

But the epidemic should be controlled and have only some economic impact, MPC secretary Titanun Mallikamas told a briefing.

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