BANGKOK • The Bank of Thailand (BoT) left its benchmark interest rate unchanged after an emergency cut last week, while projecting the worst contraction in the economy since the Asian financial crisis more than two decades ago.

The bank slashed its growth forecast for this year, now expecting the economy to shrink 5.3% compared to an earlier estimate of 2.8% expansion. Exports and tourism, the key drivers of Thailand’s economy, have both been hard hit as the coronavirus outbreak spreads around the world.

The policy rate was maintained at a record low 0.75% yesterday following a 25-basis-point (bp) reduction at an unscheduled meeting on March 20. Four of the seven Monetary Policy Committee members voted to hold, two called for a cut and one wasn’t able to attend.

“We believe they can cut by another 25bps. They could have used all the space they have now,” said Burin Adulwattana, chief economist at Bangkok Bank pcl. “The economy is on the brink of a recession with huge downside risk, so it’s time to do all they can.”

BoT assistant governor Titanun Mallikamas said yesterday that policymakers stand ready to lower rates further if needed and will keep a close watch on markets, including the baht exchange rate. In a statement delivered through the BoT’s Facebook page due to social-distancing precautions, he said the economy would recover only next year.

The benchmark SET Index extended gains after the decision, surging 6.3% to 1,099.32 as of 3:32pm in Bangkok yesterday. The baht fell 0.3% against the dollar, paring an earlier loss of as much as 0.5%.

“Quantitative easing is looking more likely for Thailand’s central bank, in our view. Conventional policy ammunition is running low. The road ahead is long for the recovery of the country’s all-important tourism sector,” said Tamara Mast Henderson of Bloomberg.

Thailand’s prime minister has declared a month-long state of emergency starting today, with some borders to be closed and Bangkok already under partial shutdown. Earlier this week, the government approved a stimulus package worth about US$3.6 billion (RM15.8 billion), including US$1.37 billion in cash handouts to some workers.

Also yesterday, the central bank cut its forecast for 2020 exports to 8.8% contraction, from 0.5% growth expected previously; lowered its 2020 inflation forecast to -1%, from 0.8% previously; predicted 3% GDP growth and headline inflation of 0.3% for 2021; and announced measures to help borrowers such as postponing payments due. The steps cover credit-card debt, revolving loans and mortgages, among other products.

Eight of 17 analysts in a Bloomberg survey accurately predicted the central bank’s hold, with the rest expecting a quarter-point cut in the benchmark rate. — Bloomberg