Thai Central Bank Cuts Rates to Support Economy Amid UncertaintyUpdate
By Amanda Lee
The Thai central bank cut its benchmark rate and flagged the possibility of slower economic growth, as ongoing global uncertainties cloud the Southeast Asian nation's outlook.
The Bank of Thailand's monetary policy committee voted 5-2 on Wednesday to lower the policy rate to 1.75% from 2.00%, with two members voting to hold rates steady.
"The Thai economy is projected to expand at a slower pace than anticipated, with more downside risks due to uncertainty in major economies' trade policies and a decline in the number of tourists," the central bank said in a statement.
It cited the likelihood of significant changes in the global economic, financial and trade landscape, pointing potential retaliatory measures in response to U.S. tariffs.
The BOT expects the Thai economy to grow by around 2% this year if trade negotiations are prolonged and the U.S. maintains its recently announced tariff rates.
However, if the U.S. imposes even steeper tariffs, the central bank said economic growth could slow further to just 1.3% for the year.
These forecasts compare with the central bank's February projection of 2.5% GDP growth, made before U.S. President Trump's "Liberation Day" tariff announcement.
The central bank also expects headline inflation to fall below its target range of 1% to 3%, due to lower global crude oil prices and government subsidies, which helping ease living and business costs.
A recent earthquake in neighboring Myanmar also threatens to disrupt Thailand's tourism sector--a key driver of economic growth--and weigh on the property market.
"However, trade protectionism and changes in the global supply chains could affect the Thai inflation outlook in the future," the central bank said.
Given a number of negative pressures on the Thai economy, Capital Economics expects the central bank to ease further.
"We expect growth to remain subdued, with looser fiscal policy unlikely to offset the drag from slower consumption growth and weaker exports," said Gareth Leather, senior Asia economist at Capital Economics, noting that recent data suggests weakness seen in the final quarter of 2024 is likely to persist into 2025.
Ahead of Wednesday's decision, Moody's Ratings downgraded Thailand's outlook to negative from stable, reflecting the risk that the country's economic and fiscal strength may weaken further.
"Thailand's near-term growth will likely be materially dented," Moody's said, both through its export exposure to the U.S. and its role in regional value chains.
Write to Amanda Lee at amanda.lee@wsj.com