July 19 (Bloomberg) -- Thailand’s central bank said rising household debt limits its scope to reduce interest rates, even as the monetary authority cut its economic growth forecast for this year on slowing exports.
Gross domestic product will increase 4.2 percent compared with 5.1 percent predicted in April, Assistant Governor Paiboon Kittisrikangwan said in Bangkok today. The central bank also cut its export growth estimate to 4 percent from 7.5 percent and inflation to 2.3 percent from 2.7 percent.
Prime Minister Yingluck Shinawatra asked state agencies to monitor signs of slowing local demand and find ways to spur the economy after the Finance Ministry last month lowered its 2013 growth forecast following a less-than-estimated expansion of 5.3 percent in the first quarter from a year earlier. Governor Prasarn Trairatvorakul said earlier today the nation’s household debt has increased to 80 percent of GDP.
“With such high household debt and high borrowing, any further rate cut will not help stimulate the economy much,” Paiboon said. “Given the current forecast for growth at 4.2 percent, the current rate should be appropriate. Still, if the economic situation changes, we are ready to adjust our policy.”
There is no need for short-term stimulus measures as the economy will recover “to its normal trend in the second half,” Prasarn said today. The Bank of Thailand last week kept its benchmark interest rate unchanged at 2.5 percent after lowering borrowing costs in May for the first time this year.
The baht was little changed at 31.08 against the dollar as of 4:25 p.m. in Bangkok. It has fallen more than 4 percent in the past six months.
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