(March 31): Thailand’s economic outlook is worsening after the deadly Myanmar earthquake last Friday, adding to pressure for another interest rate cut next month to support the sluggish economy, according to analysts.

The earthquake, which killed at least 1,700 in Myanmar, violently shook Bangkok, where at least 18 people died. More than 70 workers are missing at the site of a building that collapsed while under construction. Thailand’s benchmark stock index fell as much as 1.7% on Monday, weighed by property and financial shares.

While Thailand escaped the devastation wrought upon Myanmar, the earthquake was still bad news. Southeast Asia’s second-largest economy already faces headwinds from US President Donald Trump’s trade war, a mountain of household debt and lower-than-expected bookings from Chinese tourists, while factory output fell for a seventh straight month in February on poor auto sales.

“Thailand’s economic outlook was already dim from all the surrounding negative factors and the earthquake just made it even worse,” said Nattaporn Triratanasirikul, an economist at Bangkok-based Kasikorn Research Center Co. “This raises the chance of a back-to-back rate cut at April’s meeting and possibly one more cut in the second half of the year.”

The Bank of Thailand (BOT) unexpectedly cut rates in February and October to support the economy, but despite that shift away from a hawkish stance, it has been hesitant to commit to a full-blown easing cycle despite political pressure for more cuts. 

Standard Chartered plc said in a report on Monday that as the BOT had insisted its monetary policy is “outlook dependent”, the worsening picture raises the chance of an April rate reduction.

“A policy rate cut may be one of the options” considered by the central bank, Citi Research said in a separate report, suggesting the BOT may ask banks and non-bank financial institutions to provide more support for clients.

Kasikorn Research estimates an immediate economic impact of around 20 billion baht (US$590 million or RM2.62 billion) from the quake, mainly from a slump in month-end spending on food and services after millions of Bangkok people fled for their lives last Friday.

The central bank has instructed financial institutions to extend special debt relief for disaster-affected borrowers, similar to measures implemented due to floods a year ago, BOT deputy governor Roong Mallikamas said at a briefing in Bangkok. Its Monetary Policy Committee (MPC) will next meet on April 30.

The BOT said on Monday it’s “too soon” to assess the exact economic impact of the earthquake. Still, it expects the impact on tourism and private consumption to be short-term, while the property sector may face pressure from safety concerns, according to assistant governor Sakkapop Panyanukul.

The MPC “already increased its weight on economic growth when we cut the rate at our last meeting”, said Sakkapop, who acts as the MPC’s secretary. “We will assess the economy with new information at the next meeting on April 30.”

Separately, Permanent Secretary for Finance Lavaron Sangsnit said the economic fundamentals remain strong, and the government will continue its stimulus measures to drive economic growth this year to 3%.

The economic impact could be particularly significant for the tourism industry, which had hoped for a boom thanks to the country’s starring role in the latest season of television’s The White Lotus. The Thai Hotels Association on Sunday predicted that international tourist arrivals could drop by 10% to 15% or even more in the two weeks from Sunday.

The property sector, especially sales of condominiums, will also be under pressure as many people think twice about buying high-rise buildings, analysts said. Kasikorn Research’s Nattaporn said earthquake fears will likely delay the recovery of the property sector, which is weighed down by unsold condos.

Uploaded by Tham Yek Lee