The Bank of Thailand (BOT) is expected to keep its one-day repo rate at 2.50% on Wednesday, following recent political upheaval as the country awaits the establishment of a new cabinet. Paetongtarn Shinawatra, daughter of former Thai ex-PM Thaksin, has assumed office as the youngest prime minister after Srettha Thavisin was ousted by the Constitutional Court last week.
Despite the political turmoil, the central bank is likely to halt any rate adjustments, with Paetongtarn indicating that she may uphold many of the previous administration’s policies. She has stated intentions to review a proposed 500 billion baht cash assistance program to ensure it aligns with Thai fiscal regulations, refuting claims of pressure from Thaksin to halt the initiative.
GDP growth in Q2 improved to 2.3% year-on-year, up from a revised 1.6% in Q1, prompting the BOT to refrain from immediate rate cuts. Thailand’s planning agency has revised its 2024 GDP growth projection to a range of 2.3%-2.8%, adjusted from 2%-3% in May. The central bank is also not expected to decrease rates before any actions by the U.S. Federal Reserve.
With a focus on the new cabinet and the prime minister’s strategies to revive economic growth, attract foreign investments, and restore confidence in local equities, the BOT will assess the situation before considering any policy changes. The country’s benchmark stock index .
SET Index has been on a downward trajectory since January 2023, with foreign investors withdrawing capital, making it one of the worst performers globally, still down approximately 8% from its peak in 2024.
The BOT will exercise caution to avoid exerting pressure on the Thai Baht by preemptively reducing rates. Despite some strengthening since July, the Baht remains about 5.7% weaker against the U.S. dollar from its peak of 32.56 in January 2023.
