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Thailand's central bank warns COVID-19 outbreak could hurt economic outlook

Thailand's central bank warns COVID-19 outbreak could hurt economic outlook

People queue to check their temperature as they visit a popular entertainment street to celebrate New Year's Eve during the COVID-19 outbreak in Bangkok, on Dec 31, 2020. (Photo: Reuters/Soe Zeya Tun)

BANGKOK: Thailand's economic outlook would be substantially affected by a surge in coronavirus cases, minutes of the central bank's last policy meeting showed on Wednesday (Jan 6), as the Bank of Thailand (BOT) saw a need to preserve limited policy room.

On Dec 23, the central bank's monetary policy committee left the one-day repurchase rate at a record low of 0.50 per cent for a fifth straight meeting after three cuts earlier in 2020 to support a coronavirus-hit economy.

The central bank saw a need to preserve limited policy room to use at the most effective time, as the situation related to a new wave of coronavirus infections remained highly uncertain, the minutes said.

READ: Thailand reports 527 new COVID-19 cases, limits travel

"Thailand's economic projection would be substantially affected in the case of a surge in new infections," the minutes warned.

"The committee thus saw a need to closely monitor development and assess the adequacy of government measures".

At the December meeting, the BOT cut its 2021 GDP growth forecast to 3.2 per cent from 3.6 per cent, while predicting a 6.6 per cent contraction for 2020.

After managing to largely contain community spread of the virus for months, a cluster of cases in December linked to migrant workers and a gambling den has led to infections in over half of Thailand's provinces.

New restrictions aimed at fighting the outbreak, the country's most serious yet, will likely derail the economy's nascent recovery, with some analysts lowering this year's growth outlook to below 3 per cent.

The committee was also concerned that a rapid rise of the baht could affect a fragile recovery, the minutes said.

A new foreign exchange ecosystem should be expedited to address structural problems in the currency market and encourage more balanced capital flows, they said.

The new ecosystem would allow Thais to invest abroad more easily and in larger amounts, increase flexibility in foreign exchange risk management for entrepreneurs, and promote competition among foreign exchange service providers, the minutes said. 

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Source: Reuters/ga

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