Economy may miss forecast if virus outbreak prolonged

Thailand’s economy faced significant downside risks and limited policy room should be preserved to be used for the most effective time, the central bank’s minutes of its last meeting showed on Wednesday.

A prolonged coronavirus outbreak could cause Southeast Asia’s second-largest economy to underperform the baseline projection, squeezing business liquidity and slowing employment, the meeting minutes said.

On June 23, the Bank of Thailand’s (BoT) Monetary Policy Committee left its policy rate unchanged at a record low of 0.50% for a ninth straight meeting to help support the economy as it struggles with the country’s latest and biggest Covid-19 outbreak that emerged in April.

The committee would “stand ready to use the limited policy space at the most effective timing”, the minutes said.

At the meeting, the BoT cut its 2021 economic growth forecast to 1.8% from 3.0% and its 2022 outlook to 3.9% from 4.7%.

The recurring outbreaks increased labour market fragility and “recovery would be W-shaped” and slower than in the past, the minutes said.

The committee would ensure that exchange rate movements would not hinder the economic recovery, the minutes said.

The impact of the US monetary policy outlook on domestic long-term government bond and equity prices would be limited due to low foreign participation in the long-term Thai government bond market and continued underweighting of Thai stocks in recent periods, the minutes said.

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