● The Bank of Thailand (BoT) kept the policy rate unchanged at 0.50%, meeting house and market expectations

- A unanimous vote from its seven committee members.

● BoT revised down its GDP forecast for 2021 (3.0%; previous: 3.2%; KIBB: 3.3; 2020: -6.1%) and 2022 (4.7%; previous: 4.8%)

- The downgrade was reflective of the impact from the 2nd wave of COVID-19 infections, which peaked on 29th January, and lower tourist figures.

- Nonetheless, it remained optimistic that a swift recovery in exports and greater stimulus injections globally would support the economy. It cautioned that risks remained arising from the efficacy of the vaccination drive, recovery in the tourism sector and continuity of fiscal measures.

● Focused on the need to expedite the distribution of fiscal and financial rehabilitation measures

- Of note, the government has recently approved a new stimulus package worth THB350b (USD11.3b), consisting of soft loans and an asset-warehousing programme for businesses. Quarantine period for international visitors has also been reduced to 10 days from 14 days, while domestic tourism campaigns (i.e. We Travel Together, Thailand Travels) have been enhanced and extended.

● We continue to forecast an unchanged policy rate for the rest of the year

- The relaxation of restriction measures since February and the ongoing vaccination drive have led to improvement in mobility and consequently economic activity. Growth momentum is expected to gain further traction in the coming 2Q21, supported among others by the continued fiscal support and external demand recovery.

- Against the above backdrop, the BoT will likely hold the policy rate steady (0.50%), in line with its aim of preserving the limited policy space and ensuring a sustainable economic growth.

Source: Kenanga Research - 25 Mar 2021