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Thailand maintains rate on growth concern

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October 9, 2008

Global Financial Crisis Impact:
Thailand maintains rate on growth concern, political turmoil

Thailand's central bank kept its benchmark interest rate unchanged after two increases since July to bolster confidence in an economy marred by political turmoil and as a global credit crisis stifles lending and investment, reported Bloomberg news.

The Bank of Thailand left its one-day bond repurchase rate at a 16-month high of 3.75 percent. Policy makers are ``ready to act'' to buoy the economy, said Duangmanee Vongpradhip, an assistant central bank governor.

Asian central bankers are shifting their focus to boosting growth as inflation worries ease and the global financial crisis gathers speed. Thailand's growth outlook is worsening after protesters vowed to step up efforts to oust the government as violent clashes with police yesterday left at least one person dead and 400 injured.

``Political tension would definitely undermine Thailand's economic growth,'' said Charl Kengchon, a Bangkok-based economist at Kasikorn Research Co, a unit of Kasikornbank Pcl, who expected the rate decision.

``This is a serious risk but they would like to wait a little longer to cut to make a good assessment of the economic impact.''

Global growth is slowing after the collapse and bailout of banks in the US and Europe propelled the cost of borrowing in money markets to the highest ever. Central banks around the globe have injected billions of dollars into the financial system to spur lending and prevent the world from slipping into recession.

It may already be too late. Economists at JPMorgan Chase & Co. and UBS AG said the world is sliding into its first downturn since 2001.

The 15-nation euro area is teetering on the brink of a recession after contracting 0.2 percent between April and June; the Bank of Japan expects growth to remain ``sluggish'' and the U.S. may be heading for its worst downturn in at least a quarter century as the credit crisis forces employers to cut jobs and spending.

Thailand Central Bank Governor Tarisa Watanagase has said political uncertainty is a bigger risk to the nation's growth outlook than the global financial ``storm.''

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