THE BANK of Thailand is concerned that prolonged political unrest will affect small and medium-sized enterprises in Bangkok, and that the service sector will take the biggest hit.
Salinee Wangtal, assistant governor for the BOT’s supervision group, yesterday said SMEs in Bangkok, and especially businesses in the service sector, are suffering the most from the protests in the capital because they are dependent on the purchasing power of the people, which is currently reduced by the political uncertainty.
“Most SME operators that I have talked to said that the situation is still manageable and the commercial banks are supporting them along the way, but everybody is worried that if the protest is prolonged, they will not be able to cope,” she said.
“Even big business will be affected by then, but they will survive much longer than SMEs,” she added.
Commercial banks are helping SMEs that are affected by the protests through loan extension and lowering their interest rates, especially for businesses currently suffering from reduced cash flow and income, she said.
However, apart from the initial concern, she said the BOT was happy that the level of lending to SMEs had continued to grow.
The latest data as of end-November shows that the total credit in the system had increased by 10 per cent, while SMEs loans had grown by 14 per cent.
The assistant governor also said the number of non-performing loans (NPLs) in the system had increased, but said this was caused by the slowing down of the economy and not because commercial banks had relaxed their criteria.
NPLs as of end-November stood at 2.3 per cent, marginally up from the prior month’s 2.2 per cent.
Meanwhile, foreign investors’ net sales of Thai bonds so far this year are between Bt17 billion and Bt20 billion, following the tapering of quantitative easing (QE) in the US and Thailand’s slowing economy, according to the Thai Bond Market Association.
ThaiBMA president Niwat Kanjanaphoomin said the massive capital outflow to date this year had been expected due to the recovering US economy, which prompted the US Federal Reserve to start QE tapering.
The outflow has also continued in response to the weakening Thai economy and the ongoing political uncertainty in the Kingdom, he said.
The association has maintained its estimate of foreign investors’ net sales of Bt200 billion this year, he added.
The sales have resulted in an increase in the yields of long-term bonds. The yield rates of Thai bonds with a 10-year maturity have risen by between 0.05 and 0.10 percentage point since the beginning of the year.
On the other hand, the yield rates of short-term bonds have been stable, in line with the central bank’s low policy interest rate.
Niwat said the majority of bond dealers in a rate survey by the association expect the Monetary Policy Committee to maintain the rate at 2.25 per cent for a certain period, due to the impact of the political situation on the economy.
It is believed that once the political situation improves, the committee might decide to cut the rate to boost economic growth, he said.
Private companies are expected to slow down their plans to issue new corporate bonds due to the unfavourable climate, he said, adding that they are likely to wait until the political situation calms down before considering the issuance of new bonds.
In total, companies are expected to issue corporate bonds worth between Bt300 billion and Bt400 billion this year. Major firms, such as those in the energy, property and banking sectors, still need to issue corporate bonds to raise funds for business expansion.
Private companies’ refinancing needs this year are estimated at Bt120 billion, while financial institutions will issue bonds worth between Bt60 billion and Bt70 billion to comply with Basel III regulations.
Foreign bond holding fell to Bt707 billion at the end of last year, showing a net sell of Bt3 billion throughout the year, according to the association.
Ariya Tiranaprakit, executive vice president of the ThaiBMA, told Krungthep Turakij that the net-sell position was a result of the tapering in the US bond-buying programme.
She said that the outstanding amount showed an annual decline for the first time in recent years.