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Thai central bank holds rates, cuts 2014 growth forecast

Thailand's central bank left its key interest rate unchanged on Wednesday, as expected, and cut its economic growth forecast for 2014 nearly by half to 1.5 percent.

After its first policy meeting since a military coup in Bangkok on May 22, the Bank of Thailand said it saw the economy shrinking 0.5 percent in the first half of this year but growing 3.4-3.5 percent in the second half.

For 2015, it expected growth of more than 5 percent.

Roman Sigaev | Hemera / 360 | Getty Images

The Monetary Policy Committee voted 7-0 to keep the one-day repurchase rate unchanged at 2.0 percent. The rate was cut by 25 basis points each in November and again in March.

Southeast Asia's second-largest economy has been battered by political unrest since late 2013. In the first quarter this year, the economy contracted 2.1 percent from the previous three months.

On May 22, the army seized power, saying it needed to restore order and confidence after months of political unrest and tension. The junta has announced measures it hopes will get the sputtering economy going again.

The central bank had cut its 2014 growth forecast multiple times since anti-government demonstrations began in Bangkok late last year. The last previous forecast, made in March, was for growth of 2.7 percent.

Sixteen out of 18 economists polled by Reuters had expected the policy committee to keep the benchmark rate steady at 2.0 percent. Two had predicted a 25 basis-point cut.

Thanomsri Fongarunrung, economist with Phatra Securities in Bangkok, said as the interest rate is already low "a rate cut couldn't help much".

The previous rate cuts were to help Thailand cope with falling demand and a hit to tourism, which accounts for about 10 percent of the economy.

In May, the number of tourist arrivals fell about 11 percent from a year earlier.

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