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Bank of Thailand lowers economic growth at 3.8%

The Bank of Thailand has readjusted its projection for economic growth to below 3.8% as a result of faltering exports, slow and fragile recovery of Thai economy.

Boris Sullivan

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The Bank of Thailand has readjusted its projection for economic growth to below 3.8% as a result of faltering exports, slow and fragile recovery of Thai economy.

In April 2015, the Thai economic recovery continued to be slow and fragile, said the BoT in its latest Press Release on the Economic and Monetary Conditions for April 2015.

Households and businesses were cautious about spending and merchandise exports were sluggish in line with subdued regional trade caused by the slowdown in the Chinese economy.

Nevertheless, the tourism sector and fiscal spending on capital expenditure continued to support the economy. On the stability front, the unemployment rate decreased slightly. Inflation declined and the current account continued to post a surplus

The BoT stated that the country’s economic growth for the 2nd quarter remained sluggish and fragile overall. In light of this, the Bank of Thailand has been forced to readjust economic growth to 3.8%.

Merchandise exports continued to contract. The main culprit was the ASEAN market which felt more impact from the slowdown in the Chinese economy. Additionally, slow economic recovery in major trading partners, especially the US, Japan and Europe, and low prices of several goods related to crude oil prices helped contribute to the fourth consecutive month of export contraction in major goods categories.

Meanwhile the Ministry of Commerce  has released rice export figures for the first 4 months of this year which stood at 2.826 million tons representing a drop of 4%. Rice export figures for April of this year fell dramatically to 10.9%.

The tourism sector and public spending continued to play an important role in supporting the economy. The former continued to expand well thanks to Chinese and Malaysian tourists.

Public spending, particularly on capital expenditure for transportation and irrigation, continued to disburse well despite a slight decline after last month’s acceleration. Meanwhile, government revenues increased significantly from the same period last year.

However, this might not reflect well-expanded economic activities because it was a result of carried-over revenues from state-owned enterprises and higher excise tax rates on diesel.

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Banking

Standard and Poor’s maintain Thailand’s credit rating at BBB+

The agency is confident in Thailand’s finances, in spite of measures needed to respond to COVID-19, resulting in a deficit for 2020-2021 and hiking state debt.

National News Bureau of Thailand

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BANGKOK (NNT) – Standard and Poor’s credit rating agency has kept its level of confidence in Thailand at BBB+, in spite of COVID-19 turmoil and political unrest, but has noted it is monitoring the situation.

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Banking

Bank of Thailand keeps policy rate at 0.50 percent

The Committee voted unanimously to maintain the policy rate at 0.50 percent to support economic recovery while placing emphasis on more targeted measures.

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The Monetary Policy Committee (MPC) assessed that despite the recent better-than-expected outturn, the Thai economy would recover slowly and need support from the continued low policy rate.

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Banking

Thai banks remain resilient in Q3 2020 but profits declined

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Ms. Suwannee Jatsadasak, Senior Director, Bank of Thailand, reported on the Thai banking system’s performance in the third quarter of 2020 that the Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to support economic recovery from the COVID-19 pandemic. 

Debt relief measures, coupled with revisions to rules on loan classification and provisioning facilitated bank loan expansion and alleviated the deterioration of bank loan quality. Meanwhile, banking system’s profitability declined as banks continued to set aside loan loss provision at a high level as a cushion against a potential adverse impact of COVID-19 on loan quality.

Details are as follows:

Capital Fund of the Thai banking system was at 2,959 billion baht, equivalent to capital adequacy ratio (BIS ratio) of 19.8%.

Loan loss provision remained high with NPL coverage ratio of 149.7%

Loan loss provision remained high at 782.5 billion baht with NPL coverage ratio of 149.7%. Liquidity coverage ratio (LCR) registered at 184.9%.

 In the third quarter of 2020, banks’ overall loan growth stood at 4.6% year-on-year, a slight decline from last quarter at 5.0%. Details on bank loan are as follows:

Corporate loan (64.6% of total loan) expanded at 4.5% year-on-year, but contracted quarter-on-quarter as some large corporates switched their funding source from bank loan to bond and equity issuance. SME loan1 contracted at a lower rate, attributed to the soft loan scheme and a gradual economic recovery.

Consumer loan grew at 4.8% year-on-year

Consumer loan (35.4% of total loan) grew at 4.8% year-on-year, and increased quarter-on-quarter following the relaxation of lockdown measures. In particular, mortgage lending expanded, consistent with an increase in demand for low-rise residential properties from last quarter.

​Ms. Suwannee Jatsadasak, Senior Director, Bank of Thailand, reported on the Thai banking system’s performance in the third quarter of 2020 that the Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to support economic recovery from the COVID-19 pandemic. 

Debt relief measures, coupled with revisions to rules on loan classification and provisioning facilitated bank loan expansion and alleviated the deterioration of bank loan quality. Meanwhile, banking system’s profitability declined as banks continued to set aside loan loss provision at a high level as a cushion against a potential adverse impact of COVID-19 on loan quality.

Details are as follows:

Capital Fund of the Thai banking system was at 2,959 billion baht, equivalent to capital adequacy ratio (BIS ratio) of 19.8%.

Loan loss provision remained high with NPL coverage ratio of 149.7%

Loan loss provision remained high at 782.5 billion baht with NPL coverage ratio of 149.7%. Liquidity coverage ratio (LCR) registered at 184.9%.

Loan loss provision remained high with NPL coverage ratio of 149.7%

 In the third quarter of 2020, banks’ overall loan growth stood at 4.6% year-on-year, a slight decline from last quarter at 5.0%. Details on bank loan are as follows:

Corporate loan (64.6% of total loan) expanded at 4.5% year-on-year, but contracted quarter-on-quarter as some large corporates switched their funding source from bank loan to bond and equity issuance. SME loan1 contracted at a lower rate, attributed to the soft loan scheme and a gradual economic recovery.

Consumer loan grew at 4.8% year-on-year

Consumer loan (35.4% of total loan) grew at 4.8% year-on-year, and increased quarter-on-quarter following the relaxation of lockdown measures. In particular, mortgage lending expanded, consistent with an increase in demand for low-rise residential properties from last quarter.

 Debt relief measures, together with revisions to rules on loan classification and provisioning, have continued to alleviate banks’ loan quality deterioration in the third quarter of 2020. The gross non-performing loan (NPL or stage 3) outstanding was at 513.9 billion baht, equivalent to 3.14% of total loan, slightly edging up from 3.09% in the previous quarter.

Meanwhile, the ratio of loans with significant increase in credit risk (SICR or stage 2) to total loans was at 7.03%, down from 7.49% in the last quarter.

The banking system recorded net profit of 28.0 billion baht in the third quarter and 130.4 billion baht for the first 9 months of 2020, a decline from last year due to continued high level of provisioning expenses to cushion against potential loan quality deterioration going forward.

As a result, the ratio of return on asset (ROA) declined to 0.52% from 0.60% in the last quarter. The ratio of net interest income to average interest-earning assets (Net Interest Margin: NIM) declined from 2.60% to 2.55%, largely due to a decline in interest income on loan.

(1) Corporates with a maximum credit line of 500 million baht with a bank.

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