Thailand Swims against Tide with Interest Rate Cut

Thailand has cut interest rates for the second time since November, at a time when other Asia Pacific economies are considering potential increases.

The Bank of Thailand (BoT) reduced its benchmark interest rate by 0.25 percentage points to 2%, its lowest level in three years. The bank’s monetary policy committee said that it was acting to “lend more support to the economy” and singled out the recent slump in tourism as a result of the country’s political unrest.

“The committee judges that downside risks to growth have risen in the wake of [the] prolonged political situation,” the bank announced. “Monetary policy should be used when it is effective in supporting the economic recovery.”

Thailand’s economic growth has slowed to 0.6% in the fourth quarter of 2013 from 2.7% in Q313. A major factor in the slowdown has been the street protests in the capital of Bangkok in recent months. The political unrest has delayed major infrastructure investments, on which Thailand’s planned growth is largely dependent.

Demonstrators aim to oust prime minister Yingluck Shinawatra. Thailand held new elections at the start of last month but an opposition boycott, as well as their attempts to disrupt voting, rendered the results inconclusive, delaying the formation of a new government.

 

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