The Global Markets team at Krungsri Bank (Ayudhya) Public Company Limited commented on the outcome of the Monetary Policy Committee (MPC) meeting, which voted 4 to 2 to maintain the policy interest rate at a record low of 0.75%.

After a 0.25% cut in the emergency meeting on March 20, the MPC's decision contradicted our expectations for another reduction today, while the baht slightly strengthened to 32.82 per dollar following the vote. Since the beginning of the year,

the baht has depreciated by more than 9%, reversing from its appreciation in 2019. The MPC noted that the baht has weakened against the currencies of trading partners and major currencies, and is expected to remain volatile, even though Thailand's external stability remains strong, as reflected by high foreign reserves.

The MPC expressed concern that the COVID-19 outbreak would severely impact the Thai economy but acknowledged that the overall financial system remains stable following liquidity support measures in the bond market last week.

Policymakers assessed that the Thai economy is likely to contract significantly due to the heavy impact on tourism and exports from the COVID-19 outbreak, affecting business revenues and domestic demand.

The Bank of Thailand (BOT) has revised its GDP forecast for 2020 down to a contraction of 5.3%, from an earlier expectation of 2.8% growth, before growth is expected to turn positive in 2021. The BOT also anticipates a 60% drop in foreign tourist arrivals this year.

The MPC is scheduled to meet again on May 20, 2020. Today's MPC comments clearly indicate a supportive stance for accommodative monetary policy.

Additionally, the committee expressed negative views on growth forecasts, emphasizing the need for fiscal policy to play a crucial role in mitigating the economic impact of the outbreak.

However, the Global Markets team anticipates a possibility of reducing the policy interest rate to 0.50% and implementing targeted policies, as the impact on economic activities has spread across all sectors.