The Federation of Thai Industries (FTI) is concerned that higher interest rates will add costs for the business sector and affect consumer purchasing power.
The FTI conducted a poll in August on how much policy interest rate hikes affect the industrial sector. The respondents were 216 chief executives of FTI members in 45 industrial sectors.
The poll was carried out in response to the Bank of Thailand hiking its policy rate by 25 basis points to 2.25% in early August, the highest level in nine years.
The poll found most respondents are concerned that the trend of rising interest rates will add financial costs to businesses and make the private sector increase the prices of its products again, said Montri Mahaplerkpong, vice-chairman at the FTI.
This would impact purchasing power in Thailand. The high lending rate and high level of household debt would make people more cautious in terms of spending, he said.
The poll found 60.2% of respondents said they are greatly concerned with the rate hike to 2.25%, while 33.3% felt a medium level of concern, while the remainder felt little concern.
Regarding the impact of the rate hike, 64.8% said the interest rate burden would impact people's purchasing power, 56.5% said they would delay their new investment and reduce their production capacity, and 46.8% said they felt concerned that financial institutions would be stricter when it comes to lending.
Around 70.4% of respondents said they will cope with the trend of interest rate hikes by reducing their business costs, while 67.1% will delay new investment and adjust cash in hand to boost revolving funds. A total of 42.6% will carry out debt restructuring to be in line with their business capacity, while 31.5% will seek new capital besides borrowing via bank loans.
The FTI wants the new government to launch new economic measures to relieve the impact from high interest rates, including providing soft loans to small and medium-sized enterprises, narrowing the spread between deposit and loan rates, and asking the central bank to delay a new round of rate hikes.
The government should also urgently solve the issue of household debt, and take care of transport, energy and water bills to alleviate the burden on the public.