The Bank of Thailand’s Monetary Policy Committee (MPC) on 23 December 2020 voted unanimously to maintain the policy rate at 0.50 percent to support economic recovery.
MPC Secretary Titanun Mallikamas said that MPC assessed that the Thai economy continued to recover, but downside risks and uncertainties remained high in the period ahead. The economy would thus need support from the continued low policy rate.
MPC projected that the Thai economy would contract 6.6 percent in 2020, which was better than previously assessed because of improvement in private consumption and merchandise exports. The economy would expand by 3.2 percent and 4.8 percent in 2021 and 2022, respectively.
However, economic recovery in the short term would depend on the situation of the new wave of COVID-19 outbreak and corresponding containment measures. At a longer horizon, it would depend on the recovery in foreign tourist figures, efficacy and coverage of COVID-19 vaccination, and the labor market situation.
Financial system remained sound while vulnerabilities among households and SMEs still remained. The movement of the baht against the US dollar was volatile in line with regional currencies. MPC expressed concerns over the potential rapid appreciation of the baht owing to risk-on sentiment in financial markets and the weakening outlook of the US dollar.
MPC would closely monitor developments in foreign exchange markets, consider the necessity of implementing additional appropriate measures, as well as continuing to expedite new foreign exchange ecosystem.
It viewed that the continuity of government measures and policy coordination among government agencies would be critical to support economic recovery going forward. Monetary policy must remain accommodative. Financial and credit measures should expedite liquidity distribution to the affected groups in a targeted and timely manner, for instance, through credit guarantee schemes in order to curb credit risks, while financial institutions should accelerate debt restructuring to have a broader impact.
Fiscal measures must continue to sustain the economy. In particular, the Government should expedite budget disbursement under the economic rehabilitation plan and simultaneously implement supply-side policies to support business restructuring and upskilling of labor. This would bring about sustainable economic recovery in the long term.
Source: The Government Public Relations Department