No. 43/2019
Mr. Titanun Mallikamas, Secretary of the Monetary Policy Committee (MPC), announced
The Committee voted 5 to 2 to cut the policy rate by 0.25 percentage point from 1.75
to 1.50 percent, effective immediately. Two members voted to maintain the policy rate at
In deliberating their policy decision, the Committee assessed that the Thai economy would
expand at a lower rate than previously assessed due to a contraction in merchandise exports,
which started to affect domestic demand. Inflation was projected to be lower than the lower
bound of the inflation target. Overall financial conditions remained accommodative. Financial
stability risks had already been addressed to some extent, although there remained pockets of risks
that warranted monitoring. A more accommodative monetary policy stance would contribute to
the continuation of economic growth and should support the rise of headline inflation toward
target. Most members thus voted to cut the policy rate at this meeting. Nevertheless, two members
viewed that the policy rate cut under the already accommodative monetary policy might not lend
additional support toeconomic growth, compared with potentially increased financial stability risks.
The Thai economy was expected to expand at a lower rate than previously assessed and
below potential. Merchandise exports contracted more than the previous assessment due to the
slowdown of trading partner economies and global trade, which were affected by intensifying trade
tensions that could expand to other countries. Tourism would grow at a lower rate. Regarding
domestic demand, private consumption was expected to moderate in tandem with a decline in
non-farm household income and employment, particularly employment in the export-related
manufacturing sector. In addition, private consumption would be restrained by elevated household
debt. Private investment was projected to slow down. However, the relocation of production base
to Thailand and public-private partnership projects for infrastructure investment would support
investment in the period ahead. Public expenditure would grow at a slower pace than previously
estimated on account of public investment, which was partly a result of constrained budget
disbursement, as well as the expected delay in the enactment of the Annual Budget Expenditure
Act, B.E. 2563 (A.D. 2020). The Committee would monitor external risks from intensifying trade
tensions, the economic outlook of China and advanced economies that could affect domestic
demand, as well as geopolitical risks. Furthermore, the Committee would monitor policy
implementation of the new government and public expenditure, as well as the progress of major
infrastructure investment and its knock-on effects on private investment, which could affect the
The annual average of headline inflation was projected to be below the lower bound of
the inflation target. Key drivers were energy prices, which declined at a fast pace, and core inflation,
which was expected to moderate owing to subdued demand-pull inflationary pressures. The
Committee viewed that structural changes contributed to more persistent inflation than in the past.
Such changes included the expansion of e-commerce, rising price competition, and technological
Financial conditions over the previous period had been accommodative, with ample
liquidity in the financial system. Real interest rates remained at a low level, allowing financing by
the private sector to continue expanding. However, loans extended to both businesses and
consumers would exhibit slower growth. With regard to exchange rates, the Committee expressed
concerns over the baht appreciation against trading partner currencies, which might affect the
economy to a larger degree amid intensifying trade tensions. However, The Committee would
closely monitor developments of exchange rates and capital flows as well as assess the necessity
Financial stability remained sound overall but there remained a need to monitor risks that
might pose vulnerabilities to financial stability in the future. The Committee viewed that the
implemented macroprudential measures had to some extent curbed accumulation of
vulnerabilities in the financial system. Nevertheless, the Committee would monitor rising household
debt accumulation, growth in assets held by saving cooperatives and the interconnectedness
among saving cooperatives, and leverage by large corporates that could underprice risks. In the
following period, given the softening outlook of the Thai economy and a prolonged low interest
rate environment, microprudential and macroprudential measures would need to play an
Looking ahead, the Committee would continue to closely monitor developments of
economic growth, inflation, and financial stability, together with associated risks,especially impacts
of trade tensions, in deliberating appropriate monetary policy going forward. Nevertheless, the Thai
economy would continue to face structural problems, which would affect competitiveness and
economic growth outlook. This should be firmly addressed by all related parties.
Bank of Thailand
7 August 2019
For further information, please contact: Monetary Policy Strategy Division
Tel: +66 2283 6186, +66 2356 7872