The Bank of Thailand’s April economic report indicates domestic demand remained weak, with consumption and investment falling further, but that strong tourism growth, and a pickup in fiscal spending that began in March, are providing some cushion for growth. While fiscal spending should continue to play a bigger role in the recovery in Q2, beyond this there remain structural headwinds bearing down on spending that are unlikely to be resolved in the near term. Meanwhile, manufacturing and exports continue to be weighed by the electronics sector and falling demand from China, although the autos sector is doing relatively better.Despite the overall weakness in the April data, and the likelihood that the authorities will reduce their 2015 growth forecasts in the coming weeks, the Bank of Thailand likely to keep policy on hold when the MPC next meets on 10 June, expects Barclays. The THB REER has fallen almost 5% from its March peak following the first back-to-back rate cuts since the 2011 floods, and MPC members in recent commentary have signalled that although there is room for further cuts and for additional weakness in the currency, they are more comfortable with where the THB is currently trading and would prefer to monitor the impact of recent rate cuts before easing policy further. With that said, beyond the next meeting, the risk of further cuts remains heightened, particularly if the currency rebounds and if domestic demand indicators fail to improve, according to Barclays.
The material has been provided by InstaForex Company – www.instaforex.com