Thailand Holds Policy Rate as Economic Data Signal Recovery
Thailand kept its policy interest rate unchanged today after an unexpected cut last month, and signaled it may be done with easing as data show the economy is improving after last year’s floods.
The Bank of Thailand held its one-day bond repurchase rate at 2.75 percent, it said in Bangkok today. The outcome was predicted by 16 of 19 economists in a Bloomberg survey, while the rest called for a quarter-point reduction. The monetary policy committee’s decision was unanimous, the central bank said.
Thai manufacturing and exports increased in October, adding to signs from the U.S. and China of a recovery in the global economy. While the central bank last month lowered its growth forecast for 2013, it said today risks to expansion have subsided, and that it doesn’t see much need for more rate cuts.
“Although the recovery seems to be slowing, the economy continued to expand,” said Frances Cheung, a Hong Kong-based strategist at Credit Agricole CIB. “There’s no pressing reason for them to cut, especially when the economy has started to expand again. I think they are probably already done with the easing cycle.”
The Thai baht fell 0.1 percent to 30.71 per dollar as of 3:41 p.m. in Bangkok today. The benchmark Stock Exchange of Thailand index gained 0.3 percent.
Some Asian officials have restrained their stimulus efforts as global expansion slowed, while others have refrained from interest-rate cuts to preserve firepower should Europe’s debt crisis worsen. The Philippines today reported gross domestic product rose a better-than-estimated 7.1 percent last quarter, while India may say on Nov. 30 that GDP increased 5.3 percent.
Prime Minister Yingluck Shinawatra has extended fuel subsidies and introduced wage increases after last year’s floods to spur domestic demand and offset weaker exports. Auto production hit a record 252,165 units last month as manufacturers including Nissan Motor Co. and Toyota Motor Corp. increased output, encouraged by the government’s tax incentives.
Thai GDP increased 3 percent in the third quarter from a year earlier, after expanding a revised 4.4 percent in the previous quarter, the government said last week. Still, manufacturing jumped 36.1 percent in October from a year earlier, when the floods shuttered thousands of factories, while exports rose 15.6 percent, the fastest pace in more than a year.
“With the current economic data, there is not much need for further easing,” Bank of Thailand Assistant Governor Paiboon Kittisrikangwan told a news conference today. “Private consumption and investment would continue to be the main growth drivers for the economy, supported by strong private-sector confidence and accommodative monetary conditions.”
The central bank last month lowered its growth forecast for next year to 4.6 percent, while maintaining its prediction for this year at 5.7 percent. It lowered its inflation estimate for 2013 to 2.8 percent from 3.4 percent.
Yingluck’s government today survived a no-confidence vote in Parliament, following a debate over her administration’s handling of the economy and allegations of corruption in a state rice program, four days after an anti-government protest.
“The political risk is always there for Thailand,” said Julia Goh, an economist at CIMB Investment Bank Bhd. in Kuala Lumpur. “As long as the protest doesn’t flare up to disrupt economic activities, the economy should be quite safe.”
To contact the reporter on this story: Suttinee Yuvejwattana in Bangkok at email@example.com
To contact the editor responsible for this story: Stephanie Phang at firstname.lastname@example.org