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Thai policy rate to stay low, still fiscal room to support economy

07/16/2021 | 02:10am EDT

* Policy rate likely stay low, weak baht good for economy-c.bank

* Monetary policy must support fiscal policy - finance minister

* Government has fiscal room but may raise debt ceiling if needed (Adds detail, central bank's comments)

BANGKOK, July 16 (Reuters) - Thailand's monetary policy has to be accommodative to enable fiscal policy to work fully to help the economy, the finance minister said on Friday, as the country deals with its worst coronavirus outbreak so far.

The Southeast Asian country's economic stability remains strong with high international reserves and the public debt level within limit, Finance minister Arkhom Termpittayapaisith told a World Bank seminar.

"Fiscal and monetary measures must be closely coordinated," he said.

Thailand's benchmark interest rate, currently at a record low of 0.50%, is likely to remain low for a while, despite indications of some policy makers abroad contemplating rate increases, senior Bank of Thailand director Don Nakornthab told the seminar.

"But for Thailand, I must say it will probably be a while as the Thai economy, in comparison, has a much slower recovery than others," he said.

The baht's weakness is good for the economy, Don said. "If the baht still appreciated like last year, the economy this year may not be able to cope," Don added.

Earlier this week, the central bank said the economy could miss its forecasts due to the latest stricter coronavirus curbs.

Arkhom said short-term support measures were necessary to mitigate the impact of the outbreak, including the latest two-month debt moratorium that could be extended.

"This measure might be a bit longer. It's currently two months, but a recovery may not be as fast as thought," he said.

Stimulus measures to boost consumption will also continue until the economy fully recovers, Arkhom said.

Thailand has nearly used up 1 trillion baht ($30.5 billion)of borrowing, but it still has a further 500 billion baht of borrowing to finance support measures, said Kulaya Tantitemit, head of the fiscal policy office.

As the government continues to pursue its expansionary policy, it may raise the 60% public debt ceiling if necessary, she said, adding the current borrowing plans were still inside the limit. ($1 = 32.75 baht) (Reporting by Orathai Sriring, Kitiphong Thaichareon and Satawasin Staporncharnchai Editing by Ed Davies)

ę Reuters 2021
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