MPC maintains policy rate at 2.5%
- Published: 21/08/2013 at 03:41 PM
- Online news:
The meeting of the Bank of Thailand's Monetary Policy Committee on Wednesday agreed to keep its policy rate unchanged at 2.50%, in line with the market’s expectation.
MPC secretary-general and central bank assistant governor Paiboon Kittisrikangwan said the meeting voted 6 to 1 to maintain the rate, on the ground the current key policy rate is suitable to encouraging economic growth.
The one dissenting member wanted the RP rate cut by 0.25 percentage points, arguing it would help boost economic expansion next year, he said.
Mr Paiboon said the meeting had assessed the overall economic situation and inflation rate in making its decision. It concluded the global economic outlook has been improving.
The US economy was improving on the back of a recovery in the production and real estate sectors, he said.
In addition, the domestic private sector's financial situation had improved, which would help boost recovery in the second half of the year.
Thailand's economy slowed in the second quarter, in line with the forecast made at the previous meeting, due to an end to the mobilisation provided by the government stimulus first-car scheme, rising household debt and a slowdown in exports and private investment.
However, Thailand still has a driving force to further mobilise the economy and the central bank’s easing of monetary policy would help spur economic growth at a certain level, Mr Paiboon added.
He said the MPC believed global economic recovery would help drive the economy in the second half of the year, particularly the export sector.
A clear picture of the government’s investment in development megaprojects in 2014 will be soon clearly seen and this would help stimulate the economy and encourage investment in the private sector.
But if the investment were delayed, the MPC would have to reassess its impact on the economy, he said.
The Finance Ministry argued on Wednesday that the country’s household debt is not as high as reported by the central bank.
Ekniti Nitithanprapas, deputy director general of the Fiscal Policy Office (FPO) at the ministry, said actual household debt for the first quarter stood at only 64% of gross domestic product (GDP).
Household debt was not as high as 77.51% of GDP, totaling 8.97 trillion baht, as earlier reported by the Bank of Thailand, he said.
This did not mean that the BoT’s figure was incorrect, because the central bank had also included all lending, including loans for business investment, Mr Ekniti said.
Household debt sharply increased over the past two years. But if loans for consumption and durable goods purchases were separated from personal loans for business investment, household debt was lower than the figure stated by the central bank, he said.
Of the total 3.7 trillion baht household debt owed to commercial banks, 700 billion baht of loans were for starting new careers and running businesses. And of the 2.7 trillion baht household debt in which state-owned banks are creditors, about 700 billion baht was in loans for business operations, he added.
If the central bank’s household debt was deducted by the 1.4 trillion baht loans for business investment, or 13% of GDP, the actual household debt figure would stand at only 64%, he said.
Mr Ekniti said each category of loan should be separated to clearly show overall outlook in household debt.
He said a large number of individuals had acquired loans for running businesses without registering their firms and therefore their loans were included in household debt.
The FPO deputy director general admitted that household debt had increased over the past few years because of the need for loans to repair and renovate people’s homes damaged by the floods.
The government’s stimulus measures, particularly the first car scheme, were also reasons behind the rise in household debt, he added.
Regarding concerns over the current high level of household debt, Mr Ekniti said it would be only short-lived, on the back of an end of the government’s stimulus measures.
Household debt is now on a decline due to the ongoing economic slowdown and more stringent conditions on loan granting imposed by the banks to prevent a problem with non-performing loans, as signalled by the central bank, Mr Ekniti said.
The US and some countries in Europe faced a financial crisis because their household debt figures were as high as 110-130% of GDP. Thailand’s figure was only 77.51%, and it would take long time to reach the crisis level, if ever, he added.
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