BoT offers seasonal narrative
Brushing aside fears of rising household debt
The Bank of Thailand has sought to dispel fears that the ratio of household debt to GDP accelerated in the final quarter of last year, 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 third quarter to 77.5% in the fourth, mainly driven by credit cards and auto loans.
But the seasonally adjusted household debt ratio fell to 77.2% during the October-to-December quarter 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.
SMEs in several business sectors are showing positive loan demand, Mr Jaturong said.
New-entry non-performing loans (NPLs) of SMEs, particularly for small businesses with credit lines of up to 200 million baht, increased in the fourth quarter.
Rising demand for credit will support private investment growth, Mr Jaturong said.
At a policy rate meeting on March 28, the Bank of Thailand's Monetary Policy Committee (MPC) upgraded its economic growth forecast to 4.1% for this year 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.
Mr Jaturong said the rate-setting committee's split vote, which led it to stand pat, is not a signal that monetary policy is normalising, as the majority prefer to keep the rate at 1.5%.
"Looking ahead, the committee deemed that monetary policy accommodation should be maintained for some time yet to support more robust economic growth and foster the gradual return of headline inflation towards its medium-term target," he said.
The reshuffling of Porametee Vimolsiri, secretary-general of the National Economic and Social Development Board, one of the MPC's seven members, is not expected to lead to a change in the panel's composition.
A single member of the MPC voted for a 25-basis-point rate hike at last month's meeting.
"In deliberating the decision, the member viewed that prolonged monetary accommodation would induce households and businesses to underestimate potential changes in financial conditions," the MPC minutes read.
At the same time, "gradually reducing monetary policy accommodation in a timely manner would not hinder economic growth or price stability, but would rather reduce financial stability risks in the future as well as facilitate monetary policy normalisation in an orderly manner", they continued.