Businesses upbeat in face of inundation
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Businesses upbeat in face of inundation

Growth forecast kept at 3.5-4% this year

A bird-eye view of floods in Sakon Nakhon province. The Joint Standing Committee on Commerce, Industry and Banking says the flooding's impact will be minimal. Pattanapong Sripienchai
A bird-eye view of floods in Sakon Nakhon province. The Joint Standing Committee on Commerce, Industry and Banking says the flooding's impact will be minimal. Pattanapong Sripienchai

Top business groups are maintaining their economic growth forecast of 3.5-4% this year, assuming that flash floods ravaging some northeastern provinces will result in limited economic damage, says the Joint Standing Committee on Commerce, Industry and Banking (JSCCIB).

"The impact from the flooding will be limited, with the flood waters receding soon and things returning to normal," said Predee Daochai, chairman of the meeting of the Joint Standing Committee on Commerce, Industry and Banking, adding that both the government and private sector are implementing measures to relieve the effects from the disaster.

The Federation of Thai Industries (FTI) asked its members to prepare necessary items, especially drinking water and flatboats, to help flood victims. The FTI is monitoring the effects the flooding has had on local communities, particularly their livelihoods.

The Thai Chamber of Commerce is also monitoring the impact on the service industry, while some banks have launched measures to ease the financial burden on flood-affected customers.

Typically, the financial measures include rescheduling of debt payments, monthly instalment payment reduction, grace periods for principle and interest repayment and credit line extensions, he said.

Mr Predee, who is also chairman of the Thai Bankers' Association (TBA), said the flood-affected customers, particularly small and medium-sized enterprises, could fail to repay loans, but this would not drive up banks' non-performing loans (NPLs) significantly, while financial institutions have instruments to manage their asset quality.

"Debt restructuring for each bank is an instrument to manage NPLs," he said.

In another development, FTI chairman Chen Namchaisiri said the baht, which has strengthened at a faster pace than other regional currencies, is worrying some corners of the private sector, as it could cripple export growth.

"We expect the Bank of Thailand to use the proper instruments to manage the baht, particularly in foreign capital flows. The central bank met the FTI on Monday and the BOT's governor affirmed that it has been monitoring the foreign exchange rate closely," he said.

Don Nakornthab, senior director of the macroeconomic and monetary policy department at the central bank, recently said that the baht's appreciation is not expected to greatly diminish Thai exporters' competitive edge as the currency's real effective exchange rate -- adjusted for inflation and against a range of currencies for its main trade partners -- rose only slightly.

Despite the baht run-up, the joint private sector committee is keeping the country's export growth forecast this year unchanged at 3.5-4.5%. Thai exports managed to report strong growth of 7.8% year-on-year for the first half.

To encourage Thai operators to hedge against foreign exchange risks, The TBA has proposed lowering the hedging fee.

Meanwhile, business sentiment slightly dropped for the second consecutive month in July, mainly due to slowing investment and growth in the manufacturing sector, reported the central bank's business sentiment index (BSI).

The central bank released its BSI for July, which moderately decreased to 50.3 from 50.7 in June.

A score of 50 is the border between positive and negative sentiment.

A small drop in July's BSI was attributed to contract in the investment subindex due to a decrease in expected sales in the electronic appliance sector and a drop in domestic orders books in the machinery sectors.

But business performance, order books, production cost, and employment sub-indices were mostly unchanged from the previous month.

The report indicated the three-month expected index rose from 54.6 in June to 55.1 in July, mainly due to stronger confidence in expected business performance, especially in the trade and construction sectors.

"In addition, respondents exhibited a more optimistic outlook on production costs, especially in the manufacturing sector," said the report.

The report said the optimistic outlook was reflected in the drop in respondents reporting an increase in future production costs for sixth consecutive months.

Inflation expectations over the next 12 months remain stable for the seventh consecutive month, which is consistent with respondents' concerns over low domestic demand and the difficulty of price adjustments.

Nevertheless, respondents in the transport and hotel sectors expect improvements in selling price for the next three months, following higher tourism momentum, said the report.

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