Known mainly for its southern resort islands and high quality rice, Thailand is also a manufacturing base for electronics manufacturers and several global automakers, including General Motors Co. and Toyota Motor Corp.
A Thai tourism official said the protests have deterred 300,000 tourists so far at a cost of half a billion U.S. dollars. Thailand's visitor arrivals totaled 22.3 million last year.
Protest leaders say they want to replace the government with a non-elected council to eliminate the political machine of Thaksin Shinawatra, who was ousted as premier in a 2006 coup following months of street protests against corruption and patronage politics.
Thailand's current prime minister is Thaksin's younger sister, who led her party to a landslide victory in 2011 elections.
In cutting interest rates, the central bank was taking out insurance to buffer the economy from possible greater fallout, said Sin Beng Ong, head of Southeast Asian economic research at J.P. Morgan.
If the protests turn violent, it would lead to greater uncertainty about the longevity of the government and further hurt growth, Ong said.
Earlier this month, Thailand's economic planning agency cut its growth forecast for this year to 3 percent from 3.8-4.3 percent predicted in August.
The Thai stock market was boosted by the interest rate cut, with the SET index closing up 1.1 percent.
