Fiscal stimulus measures are still needed to support Southeast Asia's second-largest economy at least until there is a coronavirus vaccine available, Bank of Thailand Governor Sethaput Suthiwartnarueput told a group of reporters.
In September, the BOT forecast the tourism-reliant economy would shrink a record 7.8% this year before growing 3.6% in 2021. It will give new forecasts at its policy meeting on Dec. 23
Gross domestic product (GDP) shrank a less than expected 6.4% in the third quarter from a year earlier after slumping 12.1% in the second quarter.
"This year's economy is better than expected... but next year it could be worse than thought," Sethaput said, adding the BOT's projection of nine million foreign tourists next year might not be met.
Every 1 million tourists lost would impact GDP by 0.5% as the service sector accounts for nearly 70% of GDP, so "the impact is quite big" and could not be offset by improved consumption and a recovery in exports, he said.
Fiscal stimulus measures should continue while monetary policy will remain accommodative to support growth with "reasonable policy tools on the table", he said. The BOT's policy rate is already at a record of 0.50%.
But quantitative easing is not suitable for Thailand as liquidity and bond yields were not an issue, he said.
The speedy rise of the baht remained a concern as it will hurt the economic recovery and exporters, he said.
However, Deputy Prime Minister Supattanapong Punmeechaow told reporters earlier on Friday the economy was not being affected by the baht's strength, which had been driven by a weaker dollar.
The economy may contract only 6-7% this year and grow 3.5-4.0% next year, he said.
(Reporting by Kitphong Thaichareon; Writing by Orathai Sriring; Editing by Ed Davies)
By Kitiphong Thaichareon
