The Bank of Thailand (BoT) still has room to cut interest rates
to help a flagging economy after four rate reductions since
December, central bank governor Tarisa Watanagase has said.
The interest rate right now is quite low. As a
consequence the deposit rate is quite low. So thats one
factor to take into account. But Im not ruling out the
possibility of further easing, Tarisa told Emerging
. The MPC will always look at the latest
Tarisa noted that so far monetary policy has been
accommodative. Since December, the central bank has
cut its key policy rate by a combined 250 basis points to a
six-year low of 1.25%, to help an economy suffering from the
effects of the global economic crisis and political unrest at
home. The BoTs next rate-setting meeting is on May 20.
Tarisa forecast an economic contraction of between 1.5% and
3.5% of GDP for 2009, noting that the second round
impacts of the economic crisis on trade are quite a
The central bank on Thursday said industrial output, exports
and imports plunged in March. But Tarisa said a good
combination of monetary and fiscal policies will help
ease the downturn.
The central bank has eased monetary policy in tandem with
efforts to stimulate the economy by the government in response
to a collapse in exports, which are equivalent to more than 60%
of gross domestic product.
The governor rejected widespread fears that deflation may take
hold in Thailand. We have negative inflation rather than
deflation because of the sharp decline in commodity prices,
especially oil prices.
She noted that against this backdrop, declining inflation is
almost inevitable. She added: We are not
seeing a general decline in the prices of other services or
products, so the risk of deflation is low. The BoTs
forecast for the change in prices over the whole of 2009 ranges
between a 1.5% drop and a 0.5% rise.
Tarisa also warned that if the political unrest is prolonged,
it will have a negative affect on the economy and performance
could be lower than the projection. The political
situation might add more uncertainty to the economic picture,
and it might erode confidence more than expected and of
course that might have some consequences on the output
side, she said.
Concerns about political stability in Thailand have risen amid
deadly clashes last month between supporters of former prime
minister Thaksin Shinawatra and the government.
Thailands political unrest has badly hurt its tourism and
export-driven economy, in a country already suffering from a
global economic downturn. But Tarisa said: The situation
has stabilized. There will be protests going forward but as
long as theyre peaceful I think we can live with