BANGKOK (REUTERS) - Thailand's economy will grow at a much slower pace than previously forecast this year and much further below its potential, the central bank said in minutes of a meeting earlier this month when it cut interest rates to a record low.
Risks are increasing due to to the coronavirus outbreak, delayed government spending, and an intensifying drought, according to the minutes of its Feb 5 meeting, which were released on Wednesday (Feb 19).
In December, the Bank of Thailand (BOT) predicted growth of 2.8 per cent for this year, but it recently said it might be less than 2 per cent.
Thailand is the second most vulnerable economy to the coronavirus outbreak after Hong Kong, with its strong reliance on China trade and Chinese tourists, analysts at Nomura say.
The trade-reliant economy grew just 2.4 per cent last year, the weakest pace in five years, hurt by contracting exports amid global trade tensions, and sluggish investment.
At the BOT meeting, the monetary policy committee (MPC) unanimously voted to cut the policy rate by 25 basis points to 1.00 per cent, the third reduction in six months.
"The committee viewed that a more accommodative monetary policy stance would alleviate the negative impacts," the minutes said.
The MPC "would stand ready to use policy tools as appropriate," the minutes said.
The central bank will next review monetary policy and provide updated economic projections on March 25.
BOT Governor Veerathai Santiprabhob previously said there was still policy room to help growth if necessary.
Headline inflation in 2020 and 2021 were projected to be lower than the 1 per cent-3 per cent target range, the minutes said.
The committee remained concerned that the baht's value might not be consistent with economic fundamentals and would likely remain volatile despite its recent depreciation compared with trading partner currencies, they said.
The MPC said there was a need to closely monitor exchange rates and the effectiveness of the relaxation of rules to spur capital outflows.
The committee encouraged the BOT to consider implementing additional measures to stimulate investment and imports to reduce large current account surplus.