BANGKOK- After months of withstanding political pressure and public bickering, Thailand’s central bank on Wednesday delivered what the country’s government had been pressing for: it cut its key interest rate, the first reduction since 2020.
Now comes the hard part for Prime Minister Paetongtarn Shinawatra, an untested leader whose ruling Pheu Thai party has struggled to fire up the economy since it took office last year and placed its bets on a major cash handout program.
Having lost the BOT as a whipping boy, it is up to Paetongtarn’s government to deliver the goods – but the odds appear stacked against it.
“Of course, this time there are no excuses. The government must continue to stimulate the economy fully,” said Natapon Khamthakrue, an analyst at Yuanta Securities.
Bogged down by massive household debt, lacklustre consumer spending and plummeting industrial sentiment, Southeast Asia’s second-largest economy faces an extended period of headwinds after growing 2.3 percent year-on-year in the second quarter, analysts said.
“The slowdown in economic growth is far from over,” said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, forecasting a slide in GDP growth to just 2 percent next year.
The Bank of Thailand (BOT) itself cut its 2025 GDP growth projection to 2.9 percent from its earlier forecast of 3 percent, although the economy was expected to grow 2.7 percent this year, higher than the 2.6 percent it had previously forecast but lagging its Asian peers.
The central bank also emphasized that Wednesday’s 25-basis-point rate cut wasn’t the start of an easing cycle, describing it as a “recalibration” that was not triggered by political pressure.
Key growth engines of the Thai economy, including the critical automobile industry, are sputtering and the country of 66 million people is seeing a wave of factory closures that is upending its manufacturing sector.
In September, Thailand’s industrial sentiment index hit a 27 month-low due to soft domestic demand, floods that ravaged the country’s north and a strong baht currency
“Thailand has experienced the slowest recovery of any country in the region from the pandemic,” said Gareth Leather, Senior Asia Economist at Capital Economics, which expects another rate cut in December.
“GDP is only just above pre-crisis levels, and growth is likely to remain subdued over the coming months as weaker global demand and slower growth in tourism weigh on the recovery.”
