GDP forecast tipped to rise
There is a strong likelihood that the Bank of Thailand will revise upwards its forecast for growth in this year's gross domestic product from its current projection of 4.9 per cent, as many research houses now believe the target is too low, Governor Prasarn Trairatvorakul said yesterday.
A revision of the GDP growth forecast will be considered at the Monetary Policy Committee's meeting in April, he said after speaking at Siam Commercial Bank's "Investment Symposium: Thailand Outlook 2013".
Prasarn said the economy last year had expanded by 6.4 per cent, above the central bank's estimated 5.9 per cent.
Domestic consumption and private investment were key drivers of the economy in the final quarter, he said, adding that the economic trend is bright and the central bank sees exports playing a crucial role in the second half of this year.
Speaking at the symposium, Prasarn suggested Thai investors should carefully take into account macroeconomic factors and risk appetite if they want to enjoy high returns during a period of high capital inflows.
The central bank has attempted to balance capital inflow and outflow by easing regulations to encourage Thai investment overseas, both by businesses and individuals. This enables the authorities to tackle the problem posed by currency appreciation, he said.
While there are good signs for the global economy, uncertainty remains due to the debt problems in the European Union and the debt ceiling in the United States, which will push fund flows into Thailand and elsewhere in Asia.
The financial policies of the US and the EU will still influence capital inflows, which will have an impact on prices of asset such as real estate and the stock and bond markets in Thailand, Prasarn warned.
The massive fund flows have affected the investment sentiment of Thai investors, and high asset prices were invested by Thais rather than foreigners, said the central bank chief.
The role of foreign investors in the real-estate market is not great because of the regulations in place. Foreign investors are prohibited from buying land, and overall foreign ownership within a condominium project is limited to 49 per cent.
Condominium prices in the fourth quarter of last year increased by 15-16 per cent from the same period a year earlier, against an 8-per-cent rise in the third quarter. The higher prices of assets were driven by local purchasing power and urbanisation, he said.
Foreigners have invested less than local players in property funds, with BOT research finding their interests represent only 16 per cent of overall fund value.
As to the Stock Exchange of Thailand, foreigners have invested in the SET 50, while Thais have focused more on smaller stocks, Prasarn said.
In the bond market, meanwhile, foreign investors have purchased only Bt83 billion worth of Thai bonds, which is 11.6 per cent of the total, compared with 30-40 per cent in Malaysia and Indonesia.
Even though the foreign capital inflow has caused the baht to appreciate, investors and businesses should cash in on the currency's strength by investing overseas, especially in ASEAN in light of the ASEAN Economic Community coming into effect in less than two years' time, he said.
Businesses should think more about risk diversification and the expected return from overseas investment, rather than merely being concerned about the unit's appreciation, he suggested.
In a separate matter, the National Economic and Social Development Board yesterday expressed concern that households could be at risk due to the accumulation of multiple debts, after the country's outstanding household loans rocketed to Bt2.9 trillion at the end of last year.
Of the outstanding lending, about 33 per cent was accounted for by instalment loans for motorcycles, 29 per cent by personal loans and 21 per cent for instalment loans for cars, according to an NESDB report on the state of Thai society in the fourth quarter and the whole of 2012.
Suwanee Khamman, deputy secretary-general of the state think-tank, said the accumulation of multiple debts had become a risk to households, and this was a pressing concern because of continuously rising indebtedness and declining household savings.
Late payment remained high in the final quarter of last year. Three-month-overdue debt increased by 28 per cent, while non-performing consumer loans rose by 20.5 per cent.
Household savings remained at only 5 per cent of GDP, she said.
"In both the fourth quarter and the whole 2012, we found the borrowing rate of Thai households continued surging, particularly for cars. We are monitoring whether late payment could rise after the first quarter of 2013, when carmakers deliver their vehicles, as happened in 2012," Suwannee said.