Bank of Thailand to cut rates to spur growth

* What: Bank of Thailand interest rate decision

* When: Wednesday, Dec. 3, at 2:30 p.m. (0730 GMT)

* First rate cut in 16 months as the economy slows

BANGKOK, Nov 27 - The Bank of Thailand seems certain to cut interest rates for the first time in 16 months next week, a Reuters poll showed on Thursday, and economists expect further gradual monetary easing in 2009.

Seven of the 11 economists in the poll expected the central bank to cut its one-day repurchase rate by 25 basis points to 3.50 percent. The other four predicted a bigger 50 basis point cut after recent central bank statements that economic growth took priority over inflation.

"The focus has swung from inflation to growth fears, heightened by the continued concerns in the external environment," Mark Tan of Goldman Sachs said in a research note.

"Given that inflation has eased off more significantly, we think it is likely that the BoT (Bank of Thailand) will move to an easing bias," he said.

The central bank has kept the repo rate at 3.75 percent since August after two consecutive quarter percentage point increases.

Inflation has fallen sharply thanks to cheaper oil, petrol subsidies and other government measures such as free public transport for the poor.

Economists surveyed by Reuters this week expected annual inflation to fall to 2.6 percent in November from 3.9 percent in October and a 10-year high of 9.2 percent in July.

Last week the state economic planning agency cut its 2008 growth forecast to 4.5 percent, which would be the lowest in seven years, from 5.2-5.7 percent.

"Slowing economic growth is expected to narrow annual inflation to 2 percent next year from 5.7 percent in 2008. It will open the door for the BoT to trim interest rates," economist David Cohen of Action Economics in Singapore said.

Most economists predict the central bank will tread cautiously, easing policy gradually as the global credit crunch has triggered capital outflows from some emerging economies.

"The credit crunch makes it less likely there will be a bigger BoT rate cut, which might affect the baht, induce more capital outflows and create a balance of payments problem," Kobsidthi Silpachai, head of Capital Markets Research at Kasikorn Bank, said.

"BoT officials have said current Thai rates are not too high, thus no need for hasty cuts," he said.

Economist Usara Wilaipich at Standard Chartered forecast the central bank would cut rates by a combined 150 basis points between December and mid-2009, taking the key repo rate down to 2.25 percent.

"Thailand's resilient external payments position, in particular low foreign currency liabilities among Thai banks and ample foreign exchange reserves, should significantly reduce the risk of financial stress," she said. Forecasts of economists on BoT's 1-day repo policy rate:

Dec 3 end-2008 end-2009 Action Economics -25 bps 3.50% 3.00% Capital Nomura -50 bps 3.25% 2.25% DBS Bank -50 bps 3.25% 2.50% ING -50 bps 3.25% 2.50% Kasikorn Bank -25 bps 3.50% 3.00% Merrill Lynch -25 bps 3.50% 2.75% Phatra Securities -50 bps 3.25% 2.75% SCB Securities -25 bps 3.50% 2.50% Siam City Research -25 bps 3.50% 2.75% Stanchart -25 bps 3.50% 2.25% Tisco Securities -25 bps 3.50% 2.75% ------------------------------------------------------------ MEDIAN -25 bps 3.50% 2.75% HIGH -50 bps 3.50% 3.00% LOW -25 bps 3.25% 2.25% ($1 = 34.25 baht)