BoT likely to remain on hold through 2017, growth prospects remain muted

The Bank of Thailand (BoT) is expected to remain on hold through 2017. As widely expected, the central bank left rates unchanged at 1.5 percent for the 13th straight meeting Wednesday. The economy faces increasing downside risks to its growth and inflation outlook.

The global backdrop is highly uncertain, tourism has softened since the passing of the late King and a crackdown on under-priced tour packages from China and investor sentiment remains weak amid uncertainties surrounding the timeline for a return to civilian rule.

However, Thailand is by no means in a dire position with 2017 GDP still seen at a respectable 3.2 percent, the same pace as this year and 2017 inflation seen returning to its target 1–4 percent band from 0.2 percent this year.

As such, the BoT is in no urgent need to cut rates, and the onus remains on ongoing fiscal spending to support growth.

"Our base case is for BoT to maintain status quo throughout 2017. However, we do not necessarily rule out a 25bps cut in the event of adverse shocks," Commerzbank commented in its latest research report.