Thailand’s economic prospects have worsened following the devastating earthquake that struck Myanmar on March 28, heightening concerns about a potential interest rate cut next month to mitigate the struggling economy, according to analysts.
The powerful quake, which claimed at least 1,700 lives in Myanmar, also caused widespread damage in Bangkok, where at least 18 people were killed. In addition, over 70 construction workers are still missing after a building under construction collapsed. Thailand’s benchmark stock index dropped by as much as 1.7% on Monday, with property and financial stocks being the hardest hit.
Though Thailand did not experience the same level of devastation as Myanmar, the earthquake’s impact still presents significant challenges. The country’s economy, the second-largest in Southeast Asia, was already facing a series of hurdles, including the trade war initiated by US President Donald Trump, high household debt, and disappointing numbers of Chinese tourist arrivals. Factory output also continued to decline in February, marking the seventh consecutive month of contraction, largely due to sluggish car sales.
“Thailand’s economic outlook was already dim due to multiple negative factors, and the earthquake has only made things worse,” said Nattaporn Triratanasirikul, an economist at Kasikorn Research Center in Bangkok. “This increases the likelihood of another interest rate cut at April’s meeting, and potentially another in the second half of the year.”
The Bank of Thailand (BOT) surprised markets by cutting interest rates in February and October to stimulate the economy. Despite these actions, the central bank has been cautious about committing to a full easing cycle, in the face of ongoing political pressure for more cuts.
Standard Chartered Plc indicated in a report on Monday that, given the worsening economic conditions, there is a growing possibility that the BOT may announce a rate cut in April. “A policy rate cut may be one of the options,” Citi Research stated in a separate report, suggesting that the BOT might also ask banks and non-bank financial institutions to provide additional support to affected clients.
Kasikorn Research estimates that the immediate economic impact of the earthquake is around 20 billion baht ($590 million), mainly due to a sharp drop in month-end consumer spending, as millions of Bangkok residents fled the city for safety on Friday.
In response, the central bank has directed financial institutions to extend special debt relief to disaster-affected borrowers, similar to the measures introduced during last year’s flooding crisis. Bank of Thailand Deputy Governor Roong Mallikamas confirmed that the central bank’s Monetary Policy Committee will reconvene on April 30 to reassess the situation.
The earthquake’s economic toll could also hit Thailand’s tourism sector, which had hoped to capitalize on the country’s prominent role in the latest season of The White Lotus. The Thai Hotels Association projected a potential drop in international tourist arrivals of 10% to 15%, or more, over the two-week period following the quake.
The property market, particularly condominium sales, is also expected to face increased pressure. Analysts suggest that fears surrounding the earthquake could delay the recovery of the real estate sector, which has already been burdened by a glut of unsold condominiums.
As Thailand grapples with the economic aftermath of the earthquake, experts warn that the country’s economic recovery remains uncertain, and further intervention from the central bank may be necessary to stabilize the situation.
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