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The fishery, transportation, construction and food industries have been losing their ability to repay debt due to surges in oil and commodity prices, according to the Bank of Thailand's inflation report.

Many of the business sectors remain under pressure from rising costs, spurred by continuing hikes in oil and rawmaterial prices as well as possible further wage adjustment and limitation of price rises amid fragile domestic demand.

The Monetary Policy Committee (MPC) has been closely monitoring the real sector to ensure its efficient adjustment to beleaguered risk factors without widespread impact on total business stability.

"The soaring prices of oil and commodities have not yet affected the total business sector, but fragile signs in some sectors could be seen as the default rate has been increasing," according to the inflation report.

So far, firms in the fishery, transportation, construction and food sectors could not repay their debts in some months because they have depended largely on oil, metal and agricultural goods. But they are still classified in special mention, not yet as nonperforming loans.

The default rate in the fishery sector climbed from 2.7 per cent of total loans in the fourth quarter of last year to 4.8 per cent in the first quarter this year.

In the transportation sector, it rose from 1.3 per cent in the fourth quarter to 3.5 per cent in the first quarter.

In the construction sector, the loss in ability to repay debt has been apparent for four consecutive quarters since last year's second quarter.

The default rate was 3.1 per cent in the first quarter this year, compared to 2.7 per cent in the previous quarter.

The default rate in the food industry has continuously increased from 1.5 per cent of total loans in last year's second quarter to 4.2 per cent in the fourth quarter. But it slightly dropped to 4 per cent in the first quarter.

The MPC is also concerned that property developers could face shortage of liquidity amid large increases in construction costs. This could bring about dampened ability to repay debt, putting pressure on commercial banks' asset quality.

The beleaguered risks to the real sector concern the MPC over the banks' asset quality, although the banks' ability to serve with the risks remains sound.

Fragile domestic demand and a possible slowdown in the global economy could have an adverse impact on exportoriented sectors. Slowerthanexpected domestic demand recovery as well as increasing purchasing power could fuel nonperforming loans in the future, according to the report.

The report said the household sector's ability to pay debt remained sound, evidenced by declining nonperforming loans.

But the MPC is worried that the slower-than-expected economic recovery, along with continuing high inflation, could erode the ability in the future, due to falling real income.

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