Oct. 21 (Bloomberg) -- Thailand’s central bank kept its benchmark interest rate unchanged for a fourth straight meeting to support the economy’s recovery from a recession.

The Bank of Thailand maintained the one-day bond repurchase rate at 1.25 percent, it said in a statement in Bangkok today. That’s the lowest level since July 2004. All 26 economists surveyed by Bloomberg News expected the decision.

“Recovery in growth is still in its infancy and inflation is not much of a problem,” said Rajeev Malik, an economist at Macquarie Group Ltd. in Singapore. “The central bank will probably keep the rate unchanged until the first half of next year, by which time growth will be more self-sustaining.”

Central bank Governor Tarisa Watanagase said Oct. 12 the nation’s economic recovery is “fragile” and accommodative monetary policy is still necessary, suggesting she won’t follow Australia in raising borrowing costs. Recurring political protests have weighed on Thailand’s economy as the government attempts to revive growth by boosting spending.

Southeast Asia’s second-largest economy is “sure” to grow this quarter for the first time in a year, supported by government spending and improving export orders, Finance Minister Korn Chatikavanij said Oct. 5. Gross domestic product may expand as much as 4 percent in the last three months of 2009, the Finance Ministry said Sept. 23.

‘Uncertainty Remains’

The $261 billion economy shrank 4.9 percent in the second quarter from a year earlier, less than the 7.1 percent contraction the previous three months. The government will release third-quarter GDP data on Nov. 23.

“The economic recovery has just started,” Assistant Governor Paiboon Kittisrikangwan told a news conference in Bangkok after today’s rate decision. “Domestic consumption and private investment are in an early stage of recovery and uncertainty about domestic demand remains.”

Prime Minister Abhisit Vejjajiva’s government implemented a 116.7 billion-baht ($3.5 billion) stimulus package in the first half of 2009 and plans to spend 1.3 trillion baht on transportation, logistics, health and education projects over three years to help revive the economy.

“Government spending is the key driver for the economy,” said Rapee Sucharitakul, executive chairman of Kasikorn Asset Management Co., which oversees about 470 billion baht of assets. “The economy is still in the early stage of a gradual rebound after a recession. There are clear signs of growth such as the rebound in exports, consumer confidence and investments. But the recovery remains fragile.”

Export Recovery

The decline in manufacturing production by companies such as Delta Electronics Pcl unexpectedly deepened in August even as Thailand’s export slump eased, suggesting the nascent global economic recovery isn’t yet strong enough to increase demand for Asian goods.

Thai exports dropped the least in 11 months in September as companies received more orders for year-end celebrations, Commerce Minister Porntiva Nakasai said today. She expects shipments to resume growth this month, helping to narrow the contraction for the full year to between 10 percent and 13 percent.

The ministry last month forecast that exports may fall as much as 19 percent this year before rising more than 10 percent next year.

Other central banks in the region haven’t yet followed Australia’s move to raise interest rates on Oct. 6, even as policy makers from India to South Korea begin to consider if they need to exit stimulus measures introduced to counter the global recession.

South Korea

South Korea’s central bank kept the benchmark interest rate unchanged at a record-low 2 percent for an eighth meeting on Oct. 9, and signaled it may leave borrowing costs on hold as home loans slow.

Thailand’s consumer prices have fallen every month this year through September, allowing the central bank to keep its key interest rate at the lowest level since the third quarter of 2004. The rate, which was cut by a total of 2.5 percentage points from December to April, has never been reduced to below 1.25 percent since the Bank of Thailand adopted inflation targeting in 2000.

Protests since the 2006 coup that ousted former leader Thaksin Shinawatra have hurt consumer confidence and exacerbated the nation’s economic slump. Moody’s Investors Service last month kept its negative outlook for Thailand’s credit rating, saying “political unrest could erupt again” and further damage confidence.

Thaksin’s supporters have held protests against the current government since Prime Minister Abhisit took power in December, saying the premier’s rule is illegitimate because he came to office after a court dissolved the previous ruling party.

To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at Suttinee1@bloomberg.net

Last Updated: October 21, 2009 03:36 EDT