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Thai household debt, inflation top concerns of Singapore, HK investors

Singapore and Hong Kong investors are more concerned about Thailand's economic challenges - including household debt and inflation - than they are about the political situation, a Bank of Thailand official said yesterday.

"Foreign investors in Asia are more concerned about the certainty and stability of Thailand's economic recovery and the effects of western foreign policies on the country's markets than the development of the political situation and the changes in government, since they understand that Thailand has been through such a situation before," said Roong Mallikamas, spokeswoman of the central bank.

She had joined Stock Exchange of Thailand (SET) executives on a roadshow to Singapore and Hong Kong.

Roong said investors in the two markets understood the situation in Thailand better than those in the United States and Europe, given their familiarity with the country's political situation and because of their closer proximity than countries in the West.

Singapore and Hong Kong investors understand the latest positive sentiment from Thailand's investors and consumers in regard to the development of the country's situation, as witnessed in rising consumer confidence and the SET Index, she added. Consumer confidence increased to 70.70 points last month from 67.80 in April, according to the University of the Thai Chamber of Commerce.

Roong said she had explained to the foreign investors that the central bank had confidence in the nation's economic recovery, which would be led by the increase in government spending and an expected rise in private investment following greater certainty over state investment plans.

The Board of Investment will also help speed up private investment approvals, she said.

While the central bank still sees exports and domestic consumption as economic drivers, the effects of government spending and private investment will be more apparent in the second half of the year since private investors have been holding on to their money since the beginning of the year, she explained.

As to high household debt, Roong said she had explained to the foreign investors that the Bank of Thailand was less concerned about the current situation when comparing it to the level of household debt at the beginning of last year, as borrowers and creditors alike were now more wary about seeking and giving out loans.

High household debt will put a strain on the recovery of domestic consumption, and the rebound of post-crisis private spending this time will not be as great as when compared to the previous post-crisis recovery rate," she said.

"Consumer confidence has bounced back, but the recovery of consumption will take longer this time around," she added.

In regard to non-performing loans, Roong told Singapore and Hong Kong investors the reason they were stable despite the economic slowdown was that business operators had not taken a big hit during the current situation.

Despite the slowdown of revenue and profit, most operators have still managed to ride through the turbulence, she said, adding that the rates of business closures and layoff numbers had not increased because commercial banks had taken care of and provided much-needed support to their clients. Turning to rising inflation, Roong said she had explained that this was largely because of the increased price of cooking gas.

However, since there is an output gap due to economic growth being slower than the country's true potential, there is no pressure from demand, and therefore there is little pressure on the economy from the inflation rate, she pointed out.

As for the expected increase in the US policy interest rate and the speeding up of quantitative-easing (QE) tapering by the Federal Reserve, she said the effects on emerging markets this time around would depend on communication between the Fed and the global market.

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