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Money supply reduced as tourist season ends
SOMRUEDI BANCHONGDUANG
Liquidity in the banking system, while tightening somewhat from last year, remains plentiful to support economic growth, according to local bankers.
Bank executives played down fears of a liquidity shortage in the local market.
Tarisa Watanagase, the Bank of Thailand governor, said declines in the country's money supply in the second quarter reflected the end of the spending season for the local tourism sector.
But claims that the decline in cash in circulation reflected greater debt or greater household financial burdens were overstated.
''Liquidity remains plentiful in the system,'' Dr Tarisa said. ''Demand for credit continues to rise, and if looking at the loan-to-deposit ratio, banks continue to have sufficient liquidity to meet loan demand.''
Seasonal factors typically resulted in a decline in cash spending in the second and third quarters when compared with the first and fourth quarters.
According to Kasikorn Research Centre, total deposits for 14 commercial banks fell 0.29% in April from the previous month.
Deposit growth has slowed since the beginning of the year, from 2.12% month-on-month in February to 1.98% in March for the country's six largest banks.
The banks, which include Bangkok Bank, Krung Thai and Siam Commercial Bank, had deposit growth of just 0.44% in April and 0.04% in May.
But the decline in deposit growth has not raised significant concern among local bankers, as loan demand has moderated with the slowing economy and decline in investor and consumer confidence.
Prasarn Trairatvorakul, the president of Kasikornbank, said liquidity in the financial system hinged on various factors, including capital flows and the country's monetary policy.
He said the current account deficit remained relatively small, while there was little sign that the central bank was seeking to absorb liquidity from the market.
Kasikornbank posted loan growth of 5% in the first five months of the year, but maintains a full-year growth target of 10% to 15% on expectations of a rebound in demand in the second half of the year.
One analyst at Asia Plus Securities noted that loans-to-deposits for the banking system now stood at 88%, a level that should not be of particular concern.
Competition for deposits, however, has increased in recent months, with local banks competing heavily for long-term fixed deposits on expectations that interest rates will surely rise as the central bank aims to clamp down on inflation.
Usara Wilaipich, a senior economist at Standard Chartered Bank, said concerns about tight liquidity were overblown.
Liquidity was actually in surplus, she said, when considering that interbank rates remained low.
But access to credit was a separate matter, Mrs Usara added, as many banks have tightened lending criteria due to fears of rising non-performing loans with the slowing economy.
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