Calls for Thai policymakers to cut interest rates are growing despite an environment of high household debt, as the economy continues to struggle six months after a coup d’etat.
HSBC, Citi and Bangkok-based Kasikorn Research Center all expect the Bank of Thailand (BoT) to cut rates by 25 basis-points to 1.75 percent on Wednesday, from the current three-year low of 2 percent. That’s in contrast to economists polled by Reuters last month, who forecast no change in rates.
The key argument against looser policy is Thailand’s massive household debt, one of the highest in Asia at 83 percent of gross domestic product (GDP). Economists argue that lower interest rates encourage households to ramp up borrowing, thus worsening debt levels and further constraining consumption, which accounts for half of GDP. Consumer confidence is already shaky, down for the second time in three months in November.
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