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Reuters
2 days ago
- Business
- Reuters
Thailand cuts key rate to near three-year low as growth sputters, more easing expected
BANGKOK, Aug 13 (Reuters) - Thailand's central bank lowered its policy rate to a near three-year low on Wednesday to boost a slowing economy grappling with U.S. tariffs, falling prices and weak foreign tourist arrivals, with further policy easing seen later this year. As widely expected, the monetary committee unanimously cut the one-day repurchase rate (THCBIR=ECI), opens new tab by 25 basis points to 1.50%, the lowest since late 2022. It was the fourth reduction in 10 months. The economy was expected to expand this year and next, close to earlier assessments of 2.3% and 1.7%, respectively, but U.S. trade policies would exacerbate structural problems and weaken competitiveness, with small businesses especially vulnerable, the Bank of Thailand said. "The committee views that monetary policy should be accommodative going forward to support the economy," it said. This year's growth forecast has some upside from a surge in exports, assistant governor Sakkapop Panyanukul told a press conference after Wednesday's decision. Exports, a key growth driver, grew 15% annually in first six months of 2025 as shippers raced to beat U.S. tariffs, but higher U.S. levies on most trading partners went into effect on August 7, with those on Thai imports set at 19%. The economy will slow in the second half, although there is little chance of a technical recession - or two consecutive quarterly contractions, Sakkapop added. The central bank is ready to ease further if the economy faces severe shocks, he said. "Weak economic growth remains the main reason for expecting more easing," said Gareth Leather, senior Asia economist at Capital Economics, said in a note, predicting a further 50 basis-point cuts by the end of the year. Southeast Asia's second-largest economy also has struggled with weak consumption and high household debt, with analysts expecting rate reductions at reviews in October and December. Wednesday's meeting was the last for Governor Sethaput Suthiwartnarueput. New Governor Vitai Ratanakorn, widely seen as dovish, will take over in October, and he has said rate cuts will support growth. "Led by the new BoT Governor, we expect the BoT to deepen its easing cycle further, cutting the policy rate to 1.00% by 1Q 2026," HSBC economist Aris Dacanay said in a note. Kobsidthi Silpachai, head of Capital Markets Research at Kasikornbank, expects a further cut in December. Sakkapop also said that the central bank will ensure that the baht currency moves in line with economic fundamentals. The baht reversed course to fall 0.1% after the announcement, while Thai stocks (.SETI), opens new tab extended gains after the decision. Finance Minister Pichai Chunhavajira said the rate cut will boost liquidity and help exporters by weakening the baht, which has firmed more than 6% against a softening U.S. dollar so far this year. In June, the BOT predicted 2025 economic growth of 2.3%, with export growth of 4%, after factoring in U.S. tariff rates of 18%. The economy expanded 2.5% last year, lagging peers. There are still uncertainties relating to U.S. tariffs on transshipments via Thailand from third countries. The United States was Thailand's biggest export market last year, accounting for 18.3% of total shipments, with a value of $55 billion. Consumer prices (THCPI=ECI), opens new tab in July fell 0.7% from a year earlier, down for a fourth consecutive month, and below the central bank's target range of 1% to 3% for the fifth consecutive month. Headline inflation was subdued because of supply-side factors but there are no signs of deflation yet, Sakkapop said. In June, the central bank predicted headline inflation of 0.5% this year, with the core rate seen at 1%. Adding to the challenges is renewed political turmoil that could bring down, opens new tab Prime Minister Paetongtarn Shinawatra, opens new tab or the coalition government led by her Pheu Thai party.
Gulf Today
3 days ago
- Business
- Gulf Today
Thailand cuts key rate to near 3-year low as growth sputters
Thailand's central bank lowered its policy rate to a near three-year low on Wednesday to boost a slowing economy grappling with US tariffs, falling prices and weak foreign tourist arrivals, with further policy easing seen later this year. As widely expected, the monetary committee unanimously cut the one-day repurchase rate by 25 basis points to 1.50%, the lowest since late 2022. It was the fourth reduction in 10 months. The economy was expected to expand this year and next, close to earlier assessments of 2.3% and 1.7%, respectively, but US trade policies would exacerbate structural problems and weaken competitiveness, with small businesses especially vulnerable, the Bank of Thailand said. 'The committee views that monetary policy should be accommodative going forward to support the economy,' it said. This year's growth forecast has some upside from a surge in exports, assistant governor Sakkapop Panyanukul told a press conference after Wednesday's decision. Exports, a key growth driver, grew 15% annually in first six months of 2025 as shippers raced to beat US tariffs, but higher US levies on most trading partners went into effect on August 7, with those on Thai imports set at 19%. The economy will slow in the second half, although there is little chance of a technical recession - or two consecutive quarterly contractions, Sakkapop added. The central bank is ready to ease further if the economy faces severe shocks, he said. 'Weak economic growth remains the main reason for expecting more easing,' said Gareth Leather, senior Asia economist at Capital Economics, said in a note, predicting a further 50 basis-point cuts by the end of the year. Southeast Asia's second-largest economy also has struggled with weak consumption and high household debt, with analysts expecting rate reductions at reviews in October and December. Wednesday's meeting was the last for Governor Sethaput Suthiwartnarueput. New Governor Vitai Ratanakorn, widely seen as dovish, will take over in October, and he has said rate cuts will support growth. 'Led by the new BoT Governor, we expect the BoT to deepen its easing cycle further, cutting the policy rate to 1.00% by 1Q 2026,' HSBC economist Aris Dacanay said in a note. Kobsidthi Silpachai, head of Capital Markets Research at Kasikornbank, expects a further cut in December. Sakkapop also said that the central bank will ensure that the baht currency moves in line with economic fundamentals. The baht reversed course to fall 0.1% after the announcement, while Thai stocks extended gains after the decision. Finance Minister Pichai Chunhavajira said the rate cut will boost liquidity and help exporters by weakening the baht, which has firmed more than 6% against a softening US dollar so far this year. In June, the BOT predicted 2025 economic growth of 2.3%, with export growth of 4%, after factoring in US tariff rates of 18%. The economy expanded 2.5% last year, lagging peers. Reuters
Bangkok Post
14-07-2025
- Business
- Bangkok Post
Pundits see SMEs facing tough times
Small and medium-sized enterprises (SMEs) are expected to face increased challenges due to renegotiations concerning the US's reciprocal tariffs, potentially resulting in further closures, according to two research houses. Kasikorn Research Center (K-Research) revealed that SMEs continue to grapple with losses and shutdowns, driven by weak domestic demand and a surge in imports. Between 2021 and 2024, closures of small enterprises, with registered capital of less than 100 million baht, increased by an average of 7% a year. The number of business closures rose from 19,237 in 2021 to 21,764 in 2022, 23,280 in 2023 and to 23,551 in 2024, according to K-Research. During 2020–23, about 106,595 enterprises, or around 26% of all small-sized businesses, reported consecutive losses. K-Research highlighted that SMEs, particularly small enterprises, face mounting challenges amid intensifying pressures. These include the resurgence of trade tensions, increased competition from imported goods in a sluggish domestic market, and longstanding structural issues within the Thai economy. "These challenges have heightened the risk of losses and business closures among local SMEs, especially smaller enterprises," K-Research noted. Sectors where SMEs continue to face competitiveness issues and remain at a high risk of losses or closure include both manufacturing and services, specifically electrical appliances, steel and related products, construction, food services and agriculture. SCB EIC, a research centre under Siam Commercial Bank (SCB), added that if the Thai government agrees to fully liberalise its market for US agricultural and livestock products, such as pork, broiler chickens and corn, it could drive up production costs and weaken domestic competitiveness. "Opening the market could negatively impact domestic industries, particularly small-scale farmers producing these goods. However, consumers may benefit from lower prices," the EIC said. Separately, Sakkapop Panyanukul, assistant governor for monetary policy at the Bank of Thailand, said at a recent monetary policy forum that Thai SMEs remain vulnerable to rising uncertainty from US tariff policies and internal structural challenges. The central bank has been in dialogue with business operators, many of whom have expressed concerns over rising operational costs and weakening competitiveness. However, some have already begun adapting by shifting their focus to new export markets. "For instance, operators in the agricultural sector are transitioning to high-value products and moving into the animal feed industry. Some are seeking export opportunities beyond the US," Mr Sakkapop said. Although several manufacturing sectors continue to report sales growth, many are contending with declining market share. These industries include electrical appliances, furniture, steel and steel products, passenger vehicles, petrochemicals, and textiles and garments.
Gulf Today
26-06-2025
- Business
- Gulf Today
Thailand holds rates, but more easing expected amid tariff risks
Thailand's central bank left its key interest rate unchanged on Wednesday, as expected, saying it was saving some policy ammunition if needed to support an economy expected to slow amid trade uncertainty and renewed domestic political turmoil. The central bank said growth was stronger than expected in the first half of the year, in part because of frontloading of export orders to beat US tariffs, but noted the outlook was uncertain and it was ready to cut rates as needed. The Bank of Thailand's monetary policy committee voted 6 to 1 to keep the one-day repurchase rate at 1.75%, the lowest in two years. The BOT said its rate cuts in February and April were providing some support to the economy. "The Thai economy is projected to slow down going forward, as a result of increasing risks to merchandise exports stemming from US trade policies as well as geopolitics and domestic factors," it said in a statement. The stronger-than-expected start to the year saw the BOT lift its central-case growth forecast to 2.3% for 2025, almost matching last year's 2.5% and more optimistic than some market analysts. Assistant Governor Sakkapop Panyanukul told a press conference that the committee was ready to "react if the economy is slower than expected." "The BOT's tone remains dovish, pointing to room for further accommodation in the coming months," said Lavanya Venkateswaran, senior ASEAN economist at OCBC. "Our baseline is for another 25 basis point cut in the second half as downside risks to growth remain rife from perceived domestic political uncertainties and U.S. tariff risks," she said. Capital Economics said it expected 50 basis points of rates cuts before the end of the year. Thailand faces a 36% U.S. tariff on its exports, a key driver of growth, if it fails to negotiate a reduction before a moratorium expires in July. A tariff of 10% has been set for most nations while the moratorium is in place. The baht was largely unchanged against the U.S. dollar after the decision to hold rates steady, which had been expected by 21 of 33 economists in a Reuters poll. Thailand's economy has struggled with weak consumption, soaring household debt, slowing tourism, trade uncertainty and potentially steep U.S. tariffs. The BOT also lowered its forecast for tourist arrivals, a strng domestic growth driver, to 35 million this year. Adding to the challenges is a fresh round of political turmoil that could bring down Prime Minister Paetongtarn Shinawatra or the coalition government led by her Pheu Thai party. Sakkapop said that the political issues had not been factored into its forecasts, and the central bank would wait to see developments. Meanwhile, Thai stocks and the baht were largely unchanged on Wednesday after the country's central bank stood pat on rates, as expected, while other Asian currencies and equities rose as easing Middle East tensions lifted sentiment. The currency was trading at 32.623 per dollar after the Bank of Thailand (BoT) held its key one-day repurchase rate steady at 1.75%, following two straight cuts, as it looked to preserve limited policy space amid persistent trade uncertainty and deepening political turmoil. The central bank said its monetary policy remained accommodative to support the economy and that it was ready to adjust interest rates if needed. "BoT's tone remains dovish, pointing to room for further accommodation in the coming months. Our baseline is for another 25 basis point cut in 2H25 as downside risks to growth remain rife from perceived domestic political uncertainties and U.S. tariff risks," said Lavanya Venkateswaran, senior ASEAN economist at OCBC. The country has been gripped by political uncertainty after the Bhumjaithai Party, fresh off its exit from the ruling coalition, said it would pursue a no-confidence motion against Prime Minister Paetongtarn Shinawatra and her cabinet, piling pressure on the embattled government. Agencies
Business Times
25-06-2025
- Business
- Business Times
BOT holds rate, raises growth forecast despite risks
[BANGKOK] The Bank of Thailand (BOT) held its key interest rate unchanged and unexpectedly raised its growth forecast for 2025, even as it assessed risks ranging from US tariffs to the conflict in the Middle East. The central bank's seven-member Monetary Policy Committee voted 6-1 to maintain the one-day repurchase rate steady at 1.75 per cent at Wednesday's (Jun 25) meeting as predicted by 15 of 21 economists surveyed by Bloomberg. The rest forecast a quarter-point cut. The BOT now sees 2025 economic growth at 2.3 per cent, a slight improvement from the range of 1.3 per cent to about 2 per cent forecast in April. The revision was mainly due to improving exports and manufacturing in the first-half of the year, due to frontloading on tariff concerns, BOT assistant governor Sakkapop Panyanukul said at a briefing after the decision, with 2025 growth unlikely to slow to below 2 per cent if there is no major shock. 'Looking ahead, the economy is expected to slow down in the second half of 2025, as merchandise exports are facing headwinds from US tariffs and private consumption will moderate in line with weakening income and consumer confidence,' the MPC said. Growth will likely slow to 1.7 per cent in 2026. Following the first back-to-back cut since 2020, Wednesday's decision to hold the key rate reflected 'high uncertainty and limited policy space,' the MPC said. Governor Sethaput Suthiwartnarueput had warned in May that the BOT had limited policy 'ammunition' after 75 basis points of rate cuts since October. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Previous policy rate cuts have already provided some cushion against the prevailing risks, the MPC said. 'The committee deems that monetary policy should be accommodative to support the economy looking forward.' The baht gained 0.2 per cent versus the dollar to 32.612 as of 2.30 pm in Bangkok on Wednesday, strengthening in tandem with the Malaysian ringgit and the Indonesian rupiah as jitters about hostilities in the Middle East eased. The benchmark Stock Exchange of Thailand Index traded 0.5 per cent higher after the decision. Last week's fracture in the ruling coalition adds to risks for South-east Asia's economy, just as the government holds talks to avert a threatened 36 per cent tariff on exports to the US. Continued attacks in Israel and Iran are also spurring global oil prices higher, posing a risk to Thailand, which imports for its fuel needs. Also underlining the improved full-year outlook is the BOT's view that the trade war could be less severe. The BOT's base case assumes an 18 per cent tariff rate will be applied to Thailand – half the rate announced in April – and 10 per cent for other countries. Still, consumption is also softening, the number of foreign tourists is on the decline, and businesses are facing challenges from cheaper imports, the BOT said. UBS Group has downgraded Thai stocks to neutral from overweight on concerns over policy direction and investor sentiment. Meanwhile, price pressures are seen remaining modest. Headline inflation is estimated to remain low at 0.5 per cent this year and 0.8 per cent in 2026, below the central bank's 1 per cent to 3 per cent target. The BOT also sees the core gauge coming in at 1 per cent in 2025 and 0.9 per cent in 2026. 'The Committee assesses that the economic outlook remains highly uncertain,' it said. 'It stands ready to adjust monetary policy as appropriate in response to future trends and risks concerning both the economy and inflation.' Thailand remains one of South-east Asia's economic laggards, though exports surged the most since early 2022 in May as companies rushed to stockpile goods before US tariffs hit. Authorities have begun long-delayed talks with the US in a bid to reduce the Trump administration's threatened levy. Today's decision is one of the last under Governor Sethaput Suthiwartnarueput, who will complete his five-year term on Sep 30. An independent selection panel shortlisted Vitai Ratanakorn, president of the Government Savings Bank, and BOT Deputy Governor Roong Mallikamas from a list of six applicants who were interviewed on Tuesday. BLOOMBERG
