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BOT’s Financial Stability Snapshot outlines risks in eight sectors

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Thailand's financial system remains stable but living and production costs will rise if the Russia-Ukraine conflict is prolonged, according to the Bank of Thailand (BOT)'s Quarterly.

"Rising costs of living and production would affect the ability of households and the business sectors to repay debt and also affect investors' confidence," the bank said on Monday.

BOT highlighted risks for financial stability in the following eight sectors:

Household: Households are still vulnerable to high debt and have not recovered to pre-Covid levels of income. Households' ability to repay debt must be monitored, especially as the cost of living is high due to inflation.

Business: Large businesses are recovering in line with the global economy and lockdown easing. Meanwhile, loans for small and medium enterprises have expanded slightly from rehabilitation loan measures. However, debt-repayment ability and economic recovery must be monitored closely, especially in the tourism-related service sector.

Property: The property market shows signs of recovery amid increasing supply and adjustment of loan criteria for borrowers with purchasing power. However, the continued slowdown in demand is cause for concern.

Commercial banks and nonbanks: Risk for commercial banks and nonbanks is at a moderate level, but the Covid-19 crisis and Russia-Ukraine conflict will affect loan quality. In addition, high competition will pressure banks' potential in the next phase.

Cooperatives: Savings cooperatives with high liquidity are still expanding their investment in financial assets, but they will face impacts if financial market volatility rises due to the Russia-Ukraine conflict.

Financial market: The market mechanism is working smoothly, but it is necessary to monitor investors' "search for yield" behaviour and volatility in the global financial market due to major economies' move to raise interest rates and the Russia-Ukraine conflict.

Foreign investment: This sector is still strong and is likely to improve in line with a decline in the current-account deficit.

Digital assets: Low risk for Thailand's financial stability but must be monitored as the digital asset market has high volatility and expands quickly.

Published : April 12, 2022

By : THE NATION