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Thai central bank holds rates as economy shows signs of life

Thailand's central bank held its key interest rate on Wednesday (Aug 6) as the kingdom's economy showed signs of revival after an army coup ended months of political protest which rattled consumers, tourists and investors.

BANGKOK: Thailand's central bank held its key interest rate on Wednesday (Aug 6) as the kingdom's economy showed signs of revival after an army coup ended months of political protest which rattled consumers, tourists and investors.

The Bank of Thailand kept its policy rate at 2.00 per cent, a level set in March in an effort to boost an economy which shrank 2.1 per cent quarter-on-quarter in the first three months of 2014.

The economy had since shown "signs of improvements ... from private spending following the political resolution," said Paiboon Kittisrikangwan, Secretary of the Monetary Policy Committee (MPC). Explaining the decision, he said the bank expected stronger domestic demand in the second half of the year as "fiscal policy, particularly public investment, should lend further growth recovery" while exports including tourism are also expected to recover, albeit slowly.

It was the bank's second monetary policy decision since the army toppled a civilian government whose spending plans were hamstrung by months of political turmoil.

Thailand's army seized power from the elected government on May 22, pledging to galvanise the kingdom's stuttering economy. It has promised to make swift decisions on much-needed major infrastructure projects and has moved to reassure tourists the kingdom is once again safe to visit after violence linked to the protests claimed nearly 30 lives and wounded hundreds more.

An appointed national assembly will be convened for the first time tomorrow, opening the way for the selection of a new prime minister who will marshall economic policy.

Analysts said the bank's expected rate hold reflected fragile economic gains since the army power grab. "With the economy still in a delicate state, the Bank of Thailand will be keen to keep rates low," Capital Economics said in a briefing note. "But as the economy gains a stronger footing in 2015, supported by public spending, we expect the BoT to gradually tighten monetary policy."