The Thai economy is facing headwinds from the government's decision to delay the implementation of a digital wallet policy. This could lead to a weaker economic outlook and prompt the central bank to cut interest rates sooner than expected.
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| The Thailand authority is considering an earlier interest rate cut due to concerns about the potential economic impact of a delayed digital wallet policy. The delay could significantly drag down the Thai economy and lead to a more accommodative monetary policy stance. Symbolic image |
Bangkok, Thailand – August 28, 2024:
The Bank of Thailand (BOT) is considering an earlier interest rate cut due to concerns about the potential economic impact of a delayed digital wallet policy. The new government's decision to postpone the implementation of this policy could significantly drag down the Thai economy, leading the central bank to reassess its monetary policy stance, reads a Bangkok Post report.
While the BOT's Monetary Policy Committee (MPC) recently maintained the policy rate at 2.5%, they acknowledged the weakening economic outlook in the second half of the year. Private consumption is expected to slow down due to reduced income among laborers and self-employed individuals, further exacerbated by the potential delay in the digital wallet policy.
The MPC expressed concerns about the potential negative impact of the delayed policy on loan growth and asset quality. These factors could influence the BOT's decision on interest rates, as they may signal a need for more accommodative monetary policies.
BofA Securities has revised its forecast for a rate cut from mid-2025 to December 2024, citing the potential economic implications of the delayed digital wallet policy. The brokerage suggests that if economic conditions deteriorate further, a rate cut could occur even sooner.
CGS International Securities (CGSI) believes that even if the digital wallet policy is delayed, the government will likely implement alternative stimulus measures to boost domestic purchasing power. However, the delay could still have a negative impact on the economy, particularly in the short term.
Economists at CGSI recommend an overweight position for retail stocks due to the anticipated rate cuts. They caution that weaker-than-expected domestic consumption could negatively impact same-store sales growth.
The home improvement sector may experience a slower recovery as demand for construction materials and related products is expected to increase six months after the rate cut.