BoT likely to remain on hold following sluggish economic growth, private sector demand

The Bank of Thailand (BoT) is expected to keep its interest rate unchanged at the monetary policy meeting scheduled this week, following sluggish economic growth and a dullness in private sector demand.

Further, the central bank may continue to highlight some downside risks to growth in the aftermath of the passing of King Bhumibol. Given how the economy relied so much on its tourism-related sectors, the 1-year mourning period may prove to be a drag on GDP growth momentum, DBS reported.

The fall in both consumer confidence and business sentiment indices in October might have triggered further concerns for some in the market. They simply reflect the fact that private sector demand has remained sluggish for some time now, and thus, GDP growth is likely to remain within the 3-3.5 percent range for now. The BoT is likely to have priced in these considerations in setting its current policy stance.

However, recent trade data has remained on the upside for now; exports grew 5 percent y/y in the two-month period ending September.

"More importantly, we see some signs that import demand might have bottomed out. If true, the recovery in domestic demand might have gained traction in recent months, which is obviously good news for the central bank. We see no reason for further rate cuts from the BoT," the report commented.