A further reduction in Thailand’s policy interest rate will help shore up low inflation and ease the burden for local borrowers, according to the International Monetary Fund.
The multilateral organisation welcomed the Bank of Thailand’s decision in October to cut the policy rate and recommended a further reduction to support inflation and improve borrowers’ debt-servicing capacity, it said in a statement released late Thursday. Thailand’s household liabilities have ballooned to $486 billion from around $400 billion in early 2019.
The IMF recommendation comes as Prime Minister Paetongtarn Shinawatra directly appeals for a rate cut after last year’s 2.5% growth came below economists’ estimates. The Bank of Thailand’s Monetary Policy Committee is due to meet on Wednesday to review the interest rate.
“Given remaining high uncertainty in the outlook, the authorities should stand ready to adjust their monetary policy stance in a data and outlook-dependent manner,” the IMF said.
The BoT, which kept the policy rate steady at 2.25% in December after a surprise quarter-point cut in October, is expected by 10 out of 13 economists in an ongoing Bloomberg News survey to stay pat again next week.
The IMF, which first called for a further rate cut in November, maintained its 2025 GDP growth projection for Thailand at 2.9%. Risks are tilted to the downside amid escalating of global trade tensions, increased commodity price volatility and local private sector debt overhang, it added.