Prolonged unrest could shut small firms: banks

Economy January 08, 2014 00:00

By Sucheera Pinijparakarn


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Banks are increasingly concerned that some small and medium-sized enterprises with only a small amount of capital might have to cease operations after being affected by the prolonged political unrest.

Sayam Prasitsirigul, head of SME banking at Bank of Ayudhya, yesterday said that if the political situation were not solved quickly, some SMEs might have to dissolve their businesses.

The bank saw signs of delayed debt repayment among SME customers as a result of the economic slowdown during the final quarter of last year, on top of which the political turbulence continuing into this year has also hit their operations, he said.

SMEs with annual sales of less than Bt100 million and relatively little capital are those at the greatest risk of being affected by the political unrest, he added.

Weidt Nuchjalearn, first senior executive vice president of Krung Thai Bank, said the bank was now seriously worried about the effect of the political crisis on small businesses, as many of its SME customers were currently unable to plan their business for the year ahead.

He said that SMEs’ ability to repay debt would be reduced, as many operators were not receiving payment from their trading partners due to the latter having to reserve cash to ensure they have sufficient liquidity to run their own businesses.

In addition, many SME contractors needing a letter of guarantee to prepare themselves for participating in public-sector projects cannot repay debt by the due date because of delayed investment under the Bt2-trillion Budget Bill.

The bank is evaluating the damage to those contractors, but in the meantime has extended the due repayment date to help them, he added.

Kasikorn Research Centre deputy managing director Pimonwan Mahujchariyawong said SMEs in the retail and restaurant sectors in downtown Bangkok are expected to have their business interrupted by the huge "Bangkok shutdown" rally this coming Monday.

If the political turmoil is prolonged, the impact on the business sector – and on SMEs in particular – will be serious, she said.

While SMEs in the export and online sectors have not been hit by the unrest, political instability – and especially the unclear picture over formation of the next government – will negatively affect private investment and consumption yet further, she added.

Kasikorn Research Centre targets Thai economic growth of 2.5 per cent this year in the scenario that the political unrest is prolonged into the second half of the year, but more than 3 per cent if a government can be formed in the first half.

Meanwhile, TMB Analytics yesterday noted in its research that one-third of SMEs in Bangkok had expressed concern over the political unrest increasingly affecting their business.

The research house, which conducted a survey of more than 900 SMEs across the country during the final quarter of last year, said a rising number of operators had raised concerns over the prolonged political turbulence.

The number of SMEs worried about the political unrest increased from 6 per cent in October to 13 per cent in November and 19 per cent in December, in line with the heating up of the political atmosphere.

Last month, 32 per cent of Bangkok SME respondents said they were worried about the political uncertainty, up from 14 per cent in October.

Some 16 per cent of upcountry respondents said they were worried about the political situation, against just 2 per cent in October.