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Kenanga Research & Investment

Author: kiasutrader   |   Latest post: Fri, 23 Oct 2020, 9:20 AM

 

BoT MPC Decision - Policy Rate Unchanged, 2020 GDP Forecast Revised Up, Softer Deflation Expected

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Policy rate retained at a record low of 0.50%, for the third successive meeting, matching house and market expectations

- A unanimous vote from its seven-member Monetary Policy Committee.

- The Bank of Thailand (BoT) highlighted that fiscal policy should be the driving force of the recovery and that it needs to be more targeted, timely and coordinated.

The BoT revised its GDP forecast higher for 2020 (-7.8%; previous: -8.1%; KIBB: -8.0; 2019: 2.4%) and lower for 2021 (3.6%; previous: 5.0%; KIBB: 4.1%)

- 2020 GDP upgrade was attributable to slight improvement in domestic demand, though the risk of depleting household debt service capability amid fragile labour market condition remains.

- 2021 growth downgrade was underscored by expectation of a slower recovery in the tourism sector amid recent resurgence of COVID-19 cases in multiple countries.

● Softer deflation is expected (-0.9%; previous forecast: -1.7%; KIBB: -1.0 – 0.0%; 2019: 0.7%)

- Supported by rising energy prices as global oil demand recovered following the global economic reopening.

● THB’s movement will remain closely monitored, with additional FX measures concurrently assessed

- Since the previous policy meeting, THB has depreciated by 1.4% against the greenback on broad dollar weakness and rising domestic political uncertainty marked by a wave of student-led protests and resignation of the newlyappointed finance minister.

● An unchanged policy rate is expected for the remainder of 2020

- Backed by the BoT’s relatively optimistic tone regarding growth prospect, signs of an improved domestic activities and injection of additional fiscal stimulus in 4Q20.

- The BoT maintained its commitment “to use additional appropriate monetary policy tools if necessary” as COVID19 and domestic political developments remain highly uncertain.

Source: Kenanga Research - 24 Sept 2020

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