Thailand: BoT offers seasonal narrative

    • The Bank of Thailand has sought to dispel fears that the ratio of household debt to GDP accelerated in 4Q17, saying the higher family debt load could be attributed to seasonal spending by mostly middle-to upper-income earners.
    • The purchasing power and debt-servicing ability of middle- to upper-class earners remains strong, while lower income groups’ debt accumulation ability is still limited even as their income shows signs of improvement, said assistant governor Jaturong Jantarangs.
    • The country’s household debt ratio edged up from 77.3% in the 3Q17 to 77.5% in 4Q17, mainly driven by credit cards and auto loans. But the seasonally adjusted household debt ratio fell to 77.2% during 4Q17 from 77.5% in the previous three months.
    • The economic recovery and improvements in private investment, loan demand and purchasing power also contributed to the higher debt ratio, Mr Jaturong said.
    • Farming household income has gradually improved, but close monitoring is required to see whether the trend will be sustained over the longer term, he said, adding that government assistance measures for the segment would give a boost to purchasing power.
    • Moving forward, private consumption is expected to gradually expand, supported by the increase in income among non-farm households, particularly among medium- to high-income earners. Moreover, improvement in earnings of low-income households has begun as employment-related businesses and the tourism sector have risen.
    • Commercial loan demand from both large companies and small- and medium-sized enterprises (SMEs) has continued to increase in line with the economic recovery. Mr Jaturong said SMEs in several business sectors are showing positive loan demand.
    • New-entry non-performing loans (NPLs) of SMEs, particularly for small businesses with credit lines of up to THB200mn, increased in 4Q18. Rising demand for credit will support private investment growth, Mr Jaturong said.
    • At a policy rate meeting on 28 Mar 18, the Bank of Thailand’s Monetary Policy Committee (MPC) upgraded its economic growth forecast to 4.1% for 2018 but lowered its public investment growth estimate for 2019 to 3.4%, down from 9.5% predicted earlier.
    • Delays in implementing the Public Procurement and Supplies Management Act of 2017 will slow both investment and budget disbursement, Mr Jaturong said.
    • But risks to the growth projection are expected to tilt to the downside, he said, adding that the Thai economy will face greater risks from US foreign trade policy and retaliatory measures from major economies like China.

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