(Bloomberg) -- Goldman Sachs Group Inc. expects the Bank of Thailand to start easing monetary policy in the first-half of 2025 instead of the second-half this year, as the government’s plan to spend more to support economic growth lowers pressure on the central bank to cut rates.

“Sequential growth is likely to accelerate from Q2, as government spending jumps and with the new digital wallet spending boost later this year,” strategists including Danny Suwanapruti and Andrew Tilton wrote in a note on Tuesday. They now expect a 25-basis point cut in the second and third quarter of 2025, a push back from their earlier projection for easing to begin in the third quarter of this year. 

READ: BOT Likely to Delay Easing to 2025 on Deficit, Growth: Goldman

The Thai government has sought to widen annual spending by 122 billion baht ($3.3 billion) this fiscal year ending September to fund the so-called digital cash handout program aimed at boosting consumption. This is expected to push the fiscal deficit to 4.3% of gross domestic product, from an earlier projection of 3.7% shortfall, according to government estimates. 

Traders have pared their bets for an early rate cut after the BOT’s April decision, and are now pricing only about 12 basis points of cuts in the next six months, according to baht swaps. In comparison, in early March swaps were factoring nearly 50-basis points of easing over the same horizon.

After keeping rates unchanged last month, the BOT said the economy faced risks including from fiscal stimulus measures — a reference to the $14 billion cash handout program scheme.

Standard Chartered Bank Thailand has similarly delayed its rate cut call, expecting the easing to start in December from June previously, according to economist Tim Leelahaphan. 

“We continue to be bearish” on both rates and FX as the wider fiscal deficit will add to financing needs, while the baht will remain weighed down by wide Thai-US rate differentials and growth differentials with peers, the Goldman strategists added.

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