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Thailand’s financial system more vulnerable, says BoT

The Thai financial system has become more vulnerable due to the more-than-expected contraction of the economic outlook in light of the COVID-19 situation, said Bank of Thailand’s (BoT)

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The Thai financial system has become more vulnerable due to the more-than-expected contraction of the economic outlook in light of the COVID-19 situation, said Bank of Thailand’s (BoT) monetary policy committee’s latest update.

The Committee assessed that the Thai economy would contract by 8.1 percent in 2020 but would expand at 5.0 percent in 2021 in tandem with a gradual improvement in both domestic and external demand.

However, the Bank of Thailand warned that the Thai economy would contract this year more than the previous assessment due to the more-severe-than-expected COVID-19 pandemic which could lead to (1) sharp correction of asset prices in global financial markets, (2) defaults by businesses and households in many countries including Thailand, and (3) corporate bonds being downgraded to non-investment grade.

Additionally, the Committee deemed it important to prepare financial measures to continuously alleviate impacts on household and business borrowers, especially after the phase-outs of the batch of financial and credit measures.

The financial institution system remained sound

The Committee assessed that the overall financial institution system remained sound. Commercial banks had robust capital funds and loan loss provision levels, capable of absorbing the impacts of COVID-19.

The Committee also deemed it necessary for the Bank of Thailand and other related regulatory agencies to prepare measures for coping with increasing risks if debt servicing capability of borrowers were to deteriorate significantly more than expected.

Meanwhile, the Committee viewed that fiscal policy would still have capacity to restore and restructure the economy and that the government need to focus on supply-side policies to support economic restructuring after the COVID-19 pandemic subsides.

Source: Bank of Thailand

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Banking

Thailand Raises Public Debt Ceiling from 60% to 70% of GDP

Thailand’s State Monetary and Fiscal Policy Committee has decided to raise the ceiling of the public debt-to-GDP ratio from 60% to 70%

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Thailand’s State Monetary and Fiscal Policy Committee has decided to raise the ceiling of the public debt-to-GDP ratio from 60% to 70%, which will allow further public sector borrowing to rehabilitate the economy battered by COVID-19.

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Banking

Malaysia, Thailand banks to join the ASEAN Banking Integration Framework

Banking institutions from Thailand and Malaysia are invited to join the ASEAN Banking Integration Framework and indicate their interest to become a Qualified ASEAN Bank (QAB) in Malaysia and Thailand.

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Pursuant to the bilateral arrangement under the ASEAN Banking Integration Framework (ABIF) between Bank Negara Malaysia (BNM) and the Bank of Thailand (BOT) which was concluded in April 2019, banking institutions from Thailand and Malaysia are invited to indicate their interest to be a Qualified ASEAN Bank (QAB) in Malaysia and Thailand.

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