Business | Economy
Thailand plans to slash interest rates as the financial crisis hits
Thailand signalled it was ready to cut interest rates for the first time since last year and South Korea pledged more aid for its troubled borrowers, as Asian nations look to shield themselves from the global economic turmoil.
- Reuters
- Published: 23:35 November 24, 2008
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Bangkok/Seoul: Thailand signalled it was ready to cut interest rates for the first time since last year and South Korea pledged more aid for its troubled borrowers, as Asian nations look to shield themselves from the global economic turmoil.
What began as a financial crisis last year, when bank lending dried up in the face of huge losses in the US housing market, has turned into a severe downturn in the developed world, dragging down export-dependent Asian economies.
Japan, Hong Kong and Singapore are already officially in a recession while South Korea, Asia's fourth-largest economy, is poised for a sharp slowdown.
Thailand, in contrast, has held up well for months and had been the only Asian nation predicting growth would actually pick up this year after a poor 2007.
But in yet another sign that no economy is sheltered from the global headwinds, Thai authorities cut their growth forecasts and now expect the economy to turn in its worst performance in seven years in 2008 after data showed third-quarter growth hit a three year low.
In South Korea, the central bank pledged to provide up to half of a planned $6.7 billion (Dh31.5 billion) fund to help ease a cash crunch plaguing the economy.
Speculation is rife that the Bank of Korea will cut interest rates again next month after it slashed borrowing costs by a total of 125 basis points since early October.
Rapid action
The Thai central bank also looks poised to lower borrowing costs, reversing increases in July and August, when inflation hit a ten year peak. After the growth data, the Bank of Thailand flagged a rate cut while making clear cheaper credit would not solve all the economy's problems.
Thailand's economic planning agency cut its 2008 growth forecast to 4.5 per cent from 5.2-5.7 per cent seen in August, and down from last year's growth of 4.9 per cent.
"We expect the economy to slow down at a faster pace due to ongoing political instability and decelerating export growth," said Usara Wilaipich, econ-omist at Standard Chartered Bank.
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