Economic slowdown expected

The economy is expected to stage a recovery next year on revived domestic demand, the government’s economic stimulus measures and the rehabilitation of the private sector after the flood recedes, the minutes said. The disaster will not likely compromise economic capability in the long term, they said.
 

The MPC members expressed concern over the inundation and its continuing impacts, especially on the production of major exports such as rice, automobiles, electronic parts and electrical appliances. Tourism will also suffer.
 

These products will likely face lower demand because of the weakening global economy, leading to the expected export slowdown.
 

Citing higher risk to domestic growth from the global economic slowdown and the disruption of some economic activities caused by the flood, the MPC decided to leave the policy rate unchanged at 3.50 per cent.
 

This decision weighed on the side of economic restoration and expectations of easing price pressures, but inflation continued to be sustained at a high level and some product prices could spike because of the floods.
 

Six of the seven MPC members voted to keep the policy rate as is. However, the dissenter cited likely prolonged global economic problems, high risks from the global economy and severe economic impact from the flooding as reasons for a rate cut of 25 basis points to give more support to the economy, as inflation has not been accelerating much.
 

However, the majority decided that maintaining the policy rate at the current level of 3.50 per cent was accommodative and proper for the economic adjustments, though the MPC will continue to monitor developments in the global economy and domestic flooding impacts closely.