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Published on April 8, 2008

Thais are likely to spend less than expected in celebrating the upcoming Songkran festival, due to continued political turmoil and a spike in oil prices.

Banknote withdrawals from commercial banks are projected to expand 1.3 per cent to Bt137 billion this month, far below last April's 9.9-per-cent growth.

Chittima Duriyaprapan, senior director of banknote operations at the central bank, said consumers might possibly spend normally, because of concerns over the lingering risk factors of oil-price increases and political uncertainty.

"I don't think they will speed up their consumption, but rather will spend regularly during the festival, due to gloomy sentiment," said Chittima, adding that spending during the Songkran holiday was usually lower than for the January 1 New Year celebrations.

She said the withdrawal figure, however, may not reflect overall consumers' behaviour. Consumers may shift their way of spending from cash payments to credit-card payments, because debit and credit cards are easy-to-carry financial tools.

Moreover, the lower pace of banknote-withdrawal growth has resulted from early high circulation of banknotes this year. The money has circulated in the system since last December, due to high demand during the New Year festival, the general election and the Chinese New Year.

Most of the money continued circulating in the system and came back to the Bank of Thailand (BOT) only slightly in February and March, she said.

Banks' banknote withdrawals in January increased 24 per cent from the same period last year, to Bt140.6 billion before contracting 7.3 per cent and 6.9 per cent in February and March, respectively.

"Demand for money seasonally peaks in the first and second quarters. It grows moderately in the third," Chittima said.

Demand for money is largely from residents in the Central region, particularly in Bangkok, followed by the Northeast and the North.

Chittima said the central bank had already reserved different kinds of banknotes worth Bt284.2 billion or two times the expected demand from banks.

Last April, the BOT reserved Bt290.1 billion but banks actually withdrew Bt135.2billion or 46 per cent of reserved banknotes.

Chittima is optimistic that the government's stimulus packages will boost consumption if the government pushes its efforts to implement them.

The BOT said the Kingdom's circulating banknotes expanded 12 per cent to Bt813.2 billion in January. But they increased only 8.8 and 9.6 per cent in February and March, respectively.

Anoma Srisukkasem

The Nation