Thai central bank to hold key rate again despite weak growth

BANGKOK (Reuters) - Thailand's central bank on Wednesday is expected to leave its already-low policy rate where it has been for more than a year, letting government spending and tourism take the lead in reviving the weak domestic economy.

In a Reuters poll, 20 of 21 economists forecast the monetary policy committee (MPC) will leave the one-day repurchase rate unchanged at 1.50 percent. ING forecasts a cut.

Thailand's last rate change, a 25 basis-point cut, was in April 2015.

Benign headline inflation, although there was a modest rise in April, has given the Bank of Thailand room to keep the key rate low and reduced the need for further cuts.

Most of the analysts polled expect no policy change throughout 2016.

ING predicts a 25 basis-point cut to 1.25 percent, which would match the record low during the global financial crisis. It has revised its 2016 growth forecast to 3.0 percent from 3.3 percent.

Kobsidthi Silpachai, head of capital markets research at Kasikornbank, said a rate cut could come later to help keep the baht competitive for exports and tourism as well as reduce carry trade.

RARE BRIGHT SPOT

Tourism accounts for about 10 percent of Thai gross domestic product and has been a rare bright spot for Southeast Asia's second-largest economy, which has struggled since the army took power in May 2014. Exports and consumption remain tepid.

In a bid to lift activity, the junta has introduced stimulus measures and accelerated investment plans, although big infrastructure projects have been slow to get started.

"GDP growth momentum is still lackluster, as domestic demand remains weak," said Gundy Cahyadi, DBS Bank economist in Singapore.

"Any further rate cut from the BOT is unlikely to matter much though, as households are deleveraging and private investment has yet to pick up," he said.

Recent lending rate cuts by big commercial banks have given policymakers "more breathing room", said Thammarat Kittisiripat, economist of KT Zmico Securities.

On March 23, the MPC voted 7-0 to hold the rate, saying it already supported the economy and monetary policy space should be preserved.

Bank of Thailand Deputy Governor Paiboon Kittisrikangwan told Reuters last month there was no need for a rate cut for now as the economy should grow 3.1 percent this year, as forecast. Growth last year was 2.8 percent.

(Additional reporting by Pairat Temphairojana; Editing by Richard Borsuk)