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Asia, Forex

IMF urges Thailand to adopt fiscal reforms, monetary easing to support growth

BANGKOK, July 22 (Reuters) – Thailand should adopt an expansionary policy mix, including fiscal reforms and monetary easing to help support growth, which has slowed amid rising global trade tensions, the International Monetary Fund said on Monday.

The Thai economy grew by 4.1% in 2018, but growth in 2019–20 is expected to slow as uncertainty over trade tensions weigh on global demand, the IMF said in a statement after a staff visit to Southeast Asia’s second-largest economy.

Risks to the outlook are tilted to the downside, most notably the escalation of protectionism threatening the global trade system, the IMF said.

“To support domestic demand, the team recommends an expansionary policy mix consisting of judicious use of fiscal space, fiscal reforms, and monetary easing consistent with a data-dependent approach,” it said.

The mission recommends a frontloaded increase in public investment in the fiscal year 2020, supported by stronger public investment management, which can catalyze private investment and raise productivity growth, the IMF said.

“Given the delay in the enactment of the FY 2020 budget with the transition to the new government and the resulting lack of fiscal stimulus in the remaining months of 2019, as well as the moderation of the financial cycle, monetary easing would help support domestic demand and external rebalancing,” it said.

Thailand’s new cabinet pledged loyalty to the king last week.

Thailand’s central bank has left its policy interest rate unchanged at 1.75% since tightening in December. It will next review policy on Aug. 7.

“Foreign exchange intervention should be limited to avoiding disorderly market conditions,” the IMF said.

The agency said structural reforms would help address macroeconomic imbalances, promote inclusive growth and enhance the key drivers of long-term growth.

The IMF’s Executive Board is tentatively scheduled to discuss the staff report in September, the IMF said.

For the full IMF report (Reporting by Orathai Sriring Editing by Susan Fenton)

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