
The Bank of Thailand is reviewing its regulations on loan-to-value (LTV) ratios for mortgage loans and minimum payments for credit cards amid the weakened debt servicing ability of individual borrowers.
According to the central bank's assistant governor for corporate relations group, Chayawadee Chai-anant, it is reassessing these regulations based on a comprehensive evaluation of the current economic situation, the property and credit card markets, consumer access to new loans, debt repayment capabilities, and the potential side effects of relaxing these rules.
Property developers recently asked the Finance Ministry to relax LTV measures to stimulate activity in the sector. Currently, LTV rates for first residences are set at 90-100%. Meanwhile, some credit cardholders have been affected by the central bank's increase in the minimum payment requirement from 5% to 8%.
"The central bank has been monitoring consumer loan regulations and is prepared to revise the rules appropriately in accordance with the economic environment," said Ms Chayawadee.
In a related development, the central bank reported that Thailand's economic situation in June decelerated compared to May. This slowdown was primarily due to a decrease in the number of foreign visitors and tourism revenue, which had accelerated in the preceding month. Exports of goods also decreased, particularly agricultural products, as production of the output reached the end of the season, along with electronic products, which still have high inventories.
Ms Chayawadee noted that private consumption indicators in June, after seasonal adjustment, remained stable compared to the previous month. While spending on non-durables increased, spending on durables, semi-durables, and services, especially in the automotive sector, decreased.
Prospective car buyers are taking a wait-and-see approach in the automotive sector, particularly due to increased competition in car pricing. Additionally, banks are placing greater emphasis on asset quality and auto loan offerings. As a result, many potential car buyers are postponing their purchase decisions, which is impacting automotive production.
Moreover, Ms Chayawadee said consumer confidence continues to decline due to concerns over higher living costs stemming from rising energy prices and worries about the sluggish recovery of the Thai economy. While spending in the upper-income segment remains positive and middle-income spending is steady, there has been a noticeable slowdown in spending among the lower-income segment, including homebuyers looking for houses priced below 3 million baht.
In the second quarter of 2024, the Thai economy continued to recover from the previous quarter, mainly driven by the tourism sector. However, foreign tourist arrivals decreased slightly to 8.1 million from 9.4 million in the first quarter of the year.
The central bank projects that the government's digital wallet initiative, with a total budget of 450 billion baht, will contribute 0.9 percentage points to Thailand's GDP growth. The handout scheme is expected to boost the country's GDP by 0.3 percentage points in 2024 and 0.2 percentage points in 2025, according to Ms Chayawadee.