The bank said private consumption and investment were likely to improve, but it expected a record contraction in gross domestic product this year, with the economy taking at least two years to return to pre-pandemic levels as the key tourism industry reels from a ban on foreign visitors.
The Bank of Thailand's (BOT) monetary policy committee voted unanimously to keep the one-day repurchase rate <THCBIR=ECI> steady at an all-time low of 0.50% for a third straight meeting, as was widely expected.
"The committee viewed that the extra accommodative monetary policy since the beginning of the year as well as fiscal, financial, and credit measures additionally announced, helped alleviate adverse impacts and would support the economic recovery after the pandemic subsided," it said in a statement.
Phacharaphot Nuntramas, an economist with Krung Thai Bank who predicts a contraction of 8.8% this year, said, "It's a surprise that their outlook was better this year. We don't know what signs the BOT saw."
While the bank raised its 2020 GDP forecast, it still expects the economy to shrink by a record 7.8% in 2020 versus a previous forecast for an 8.1% contraction.
"Government policies would need to be the main driver and to be targeted and timely," MPC secretary Titanun Mallikamas told a briefing. "Monetary policy will no longer play a major role."
The new economic forecasts suggested "the rising remoteness of future rate normalization", said Kobsidthi Silpachai, head of capital markets research of Kasikornbank.
Thailand's economy suffered its worst contraction in more than two decades in the second quarter, but conditions have improved recently, with the removal of most virus curbs to revive activity.
Thailand's response included three rate cuts, soft loans, debt relief steps and a government package of 1 trillion baht ($33 billion).
The BOT forecast exports would fall 8.2% this year before rising 4.5% next year. But it cut to 3.6% its 2021 GDP growth forecast from 5.0%, due to fewer foreign visitors.
Foreign tourist numbers are forecast at 6.7 million this year, down from a projected 8 million, and at 9 million next year. Last year, a record 39.8 million tourists spent the equivalent of 11.4% of GDP.
The bank said 2020 headline inflation will be minus 0.9%, versus a target range of 1%-3%.
By Orathai Sriring and Kitiphong Thaichareon