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Published on April 8, 2008

A key positive indicator is the corporate investment loan sector, which returned to growth late last year after 10 months of contraction.

Bandid Nijathaworn, the Bank of Thailand's deputy governor, told a Nation Multimedia Group briefing last Friday that the latest figures are encouraging and hoped the momentum would be sustained.

Previously, corporate loans were mostly granted for working capital, not for investment in capital goods.

Figures show that corporate investment loans recorded a 0.6 per cent year-on-year growth in December 2007 after a negative growth rate of 1.2 per cent in June and minus 1.8 per cent in September 2007.

In terms of the overall credit market, February 2008 figures show a 5.3 per cent year-on-year growth, with a total of Bt7.2 trillion in loans outstanding.

The March 2008 growth rate was 4.5 per cent year-on-year.

In terms of imported capital goods, the year-on-year growth rates were 23 per cent in February and 60.5 per cent in January.

According to Bandid, domestic consumption also started to recover in the third quarter of last year after 2-3 years of extended weakness.

The retail, credit-card and housing sectors have enjoyed relatively strong growth over the past few months, he noted.

However, the central bank's deputy chief said authorities are closely watching the inflation trend as the March figure of 5.3 per cent is rather high.

On the effects of the US sub-prime loan crisis on Thai banks and financial institutions, Bandid said the negative consequences have been restricted due to limited exposure of assets.

In addition, the average capital adequacy ratio of Thai banks and financial institutions is currently quite high at 14.6 per cent.

As far as the interest rate is concerned, sources said the MPC is unlikely to cut its one-day re-purchase rate further from the current 3.25 per cent as expected earlier.

That is because of the ongoing growth momentum, as indicated by corporate loans for capital goods, and higher inflation, sources said.

Finance reporters

The Nation