● 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