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Thai central bank says virus outbreak to cut GDP by 0.8-2.0% in 2021

* Thai economy facing higher risks than expected – bank official

* Cbank cut 2021 GDP growth forecast to 1.8% in June

* Fiscal policy necessary to support economy – bank official (Updates throughout with quotes, details from cbank)

By Orathai Sriring and Satawasin Staporncharnchai

BANGKOK, July 22 (Reuters) – The latest coronavirus wave to hit Thailand is expected to reduce gross domestic product by 0.8-2.0% this year, Thailand’s central bank said on Thursday, as the Southeast Asian country tackles its biggest outbreak of the virus to date.

The current COVID-19 wave has seen daily record infections, which the Bank of Thailand (BOT) said had became more severe and prolonged than previously expected.

Stricter containment measures have caused economic activity to plummet to levels close to those reached during a 2020 lockdown and is likely to fall further, senior director Chayawadee Chai-Anant told a briefing.

GDP could drop by as much as 2.0% if the current curbs do not reduce infections and the outbreak drags on throughout the year,” she said, adding a base case was for a 1.2% GDP fall.

“That’s only an impact on GDP. But there could be more fiscal measures, together with other factors such as exports to support the economy,” Chayawadee said.

The economy faces higher risks than projected in June and the impact on activity is likely to be prolonged, she said, without giving specific GDP forecasts. “The situation is still fluid”.

In June, the BOT cut its GDP growth forecasts for the year to 1.8% from 3.0%, and a 2022 outlook to 3.9% from 4.7%. It is due to release new projections in September.

The BOT has fully implemented accommodative monetary policy and fiscal policy will be necessary to support the economy going forward, Chayawadee said. The BOT has left its key rate at a record low of 0.50% since the middle of last year.

If the government raises the public debt to GDP ceiling, it should not be a worry if it maintains fiscal discipline, she added. (Reporting by Orathai Sriring and Satawasin Staporncharnchai, additional reporting by Kitiphong Thaichareon Editing by Ed Davies and James Pearson)

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