Thailand reduced its official interest rate to the lowest level in three years on Wednesday to boost the economy in the face of a protracted political crisis.
The Bank of Thailand lowered its policy rate by 0.25 percentage points, to 2.00 per cent — a level last seen in January 2011.
It is the second time since November that the central bank has lowered borrowing costs to cushion the blow of political turmoil.
“Downside risks to growth have risen in the wake of prolonged political situation,” it said in a statement after its Monetary Policy Committee voted 4-3 for the cut.
Thailand’s economic growth slowed sharply in the fourth quarter of 2013, to just 0.6 per cent year-on-year, from 2.7 per cent in the previous quarter, official figures showed last month.
Prime Minister Yingluck Shinawatra has faced months of street protests aimed at ousting her elected government and installing an unelected “people’s council” to oversee reforms.
Her administration has limited caretaker powers because opposition demonstrators disrupted a general election last month.
The authorities have also suffered a series of legal defeats by the courts, which have been accused by government supporters of colluding with the opposition to try to oust Yingluck.
In a new setback, the Constitutional Court ruled Wednesday that a legislative bill to enable the government to borrow two trillion baht (US$62 billion) for infrastructure projects was unconstitutional.
It said the legislation — which is different to a normal budget bill — did not meet the requirement that such funds must be urgently required.
The cabinet had earmarked the money for a high-speed railway and other transportation mega projects to drive the nation’s economic development.
“The infrastructure was important for a developing country. It can attract investors and at the same time benefit its people,” deputy government spokesman Sunisa Lertpakawat said after the court ruling.
Political violence and a state of emergency imposed in Bangkok and surrounding areas have dealt a blow to the kingdom’s key tourism sector and raised fears of a drop in foreign investment.
“Prolonged political uncertainties would continue to impede the recovery of private consumption and investment,” the central bank said in its statement.
“Nonetheless, exports of goods should gradually improve on the back of a recovery in major economies, providing impetus to growth this year,” it added.