Four central banks in Southeast Asia signaled aggressive policy action this week to curtail the impact of the new coronavirus.
The central banks are from Indonesia, the Philippines, Singapore, and Thailand.
The Bank of Thailand (BoT) slashed its benchmark interest rate Wednesday to a historic low of 1%. The BoT’s monetary policy committee unanimously voted for the decision.
On the same day, the Monetary Authority of Singapore (MAS) indicated there was room for further easing in the currency.
Meanwhile, the Philippines underscored its willingness to ease. Governor Benjamin Diokno said that it is preferable to cut interest rates “the sooner, the better” to counter the virus impact.
Indeed, the Philippine central bank reduced its benchmark interest rate by 25 basis points, in line with the prediction of 17 of 25 economists polled by Bloomberg.
The dovish remarks sparked currency depreciations across the region. The Singapore dollar dropped the most in Asia on Wednesday after the MAS comments, tumbling as much as 0.9% to a four-month low. On Thursday, a day after Thailand’s rate cut, the baht posted the largest decline, down as much as 0.7%.
“We needed a preemptive move. We didn’t want to act too late,” Bank of Thailand Governor Veerathai Santiprabhob said in a speech Thursday morning. “We still have policy space for any unexpected future event.”
Southeast Asia has braced itself for policy easing, given trade and global demand pressures. Now, the region’s central bankers have an additional concern as the number of confirmed cases and deaths linked to the coronavirus continues soaring.
The epidemic has already hammered the critical tourism industry and disrupted tightly linked supply chains, especially as factory shutdowns in China extend beyond the Lunar New Year holiday.
This year’s round of easing in Southeast Asia began Jan 22, when Malaysia surprised with an interest-rate cut, citing broad worries about the economic growth outlook.
After Thursday’s decision in the Philippines, next up is Bank Indonesia, which will meet Feb 20.
Bank Indonesia Governor Perry Warjiyo said Wednesday the central bank would keep policy accommodative this year. He also added that the benchmark interest rate is not the only tool officials will use.
The novel coronavirus has claimed 563 lives in China and one each in the Philippines and Hong Kong SAR. There have been 79 confirmed cases of the novel coronavirus in the Southeast Asia region. Picture credit: _freakwave_ from Pixabay