July 8, 2020 / 5:00 AM / a month ago

UPDATE 1-Thai financial system more vulnerable as pandemic hits economy -cbank minutes

* Need to prepare more financial steps to ease virus impact

* Fiscal policy still has capacity to help economy

* Baht strength could affect economic recovery

* No deflation risk yet, inflation to return to target next year (Adds detail, context)

By Orathai Sriring

BANGKOK, July 8 (Reuters) - Thailand’s financial system had become more vulnerable due to a weaker-than-expected economic outlook amid the coronavirus outbreak, minutes from the latest central bank policy meeting showed on Wednesday.

The Bank of Thailand (BOT)’s monetary policy committee voted unanimously on June 24 to leave the one-day repurchase rate unchanged at a record low of 0.50%. It will next review policy on Aug. 5.

“The committee assessed that the monetary policy stance had been eased in a timely manner since the outbreak took place, with three policy rate cuts to a record low,” the minutes said.

Some members felt it was necessary to “preserve limited monetary policy space in order to act at the appropriate and most effective timing,” the minutes said.

At the meeting, the BOT cut its 2020 GDP outlook to a record contraction of 8.1% from the previous forecast for 5.3% shrinkage.

The MPC was concerned that the strength of the baht could affect an economic recovery.

The committee felt it was important to prepare financial measures to continuously alleviate the outbreak’s impact on household and businesses after the phase-outs of earlier financial and credit steps, the minutes said.

Timely fiscal measures, accommodative monetary policy, credit measures and accelerated debt restructuring remained vital to support an economic recovery, according to the minutes.

Fiscal policy would still have capacity to restore and restructure the economy and that the government needed to focus on supply-side policies to support economic restructuring after the outbreak subsides, according to the minutes.

Thailand was not facing deflation risks even though headline inflation was projected to be minus 1.7% this year, as it would rise to the target next year, the minutes said.

For the full minutes here (Reporting by Orathai Sriring Editing by Ed Davies)

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