Major
banks and the Stock Exchange of Thailand (SET) have warned that investors
should keep a close watch on efforts to resolve the European Union's escalating
sovereign-debt problems, as the crisis could affect the Thai economy, including
the capital market.
Meanwhile, lower September inflation figures
released Monday could leave more room for the Bank of Thailand (BOT)'s Monetary
Policy Committee not to raise the policy interest rate at its next meeting on
October 19.
The central bank has hiked the policy rate
seven times since October last year. The current level is 3.5 per cent.
SET president Charamporn Jotiksthira warned
Thai investors to closely monitor Europe's sovereign-debt problems, as there
are still no signs of a permanent long-term resolution of the crisis.
The SET Index suffered another blow on Monday,
plummeting 46.90 points, or 5.12 per cent, to 869.31 on concerns over Greece's
likely default on its debt repayments. Turnover was 26.64 billion baht
(US$851.3 million).
Reports that Thailand will not meet its
deficit-reduction targets have driven markets down worldwide.
Pongpen Ruengvirayudh, a senior director of
the BOT, said the fall in Thai stocks was the result of risk aversion on the
part of investors.
While this would likely last for some time,
she said there was no need for Asean countries to concertedly launch measures
to deal with it.
The Bangkok University Research Centre said
the next Thai economic-forecast index would drop to 47.46 points from the
previous survey result of 62.11 points, reflecting an expected economic slump
in the next three to six months. The centre's Bangkok Poll, which surveyed 63
economists and analysts from September 26-30, showed economic growth is
expected to continue slowing over the next six months. The centre said it was
an important warning sign for the economy when the index fell below 50 points.
The key factors behind the predicted
contraction in the next three months are lower consumption, reduced spending by
the private sector, lower exports and a decrease in the number of tourist
arrivals, it said.
The only factor with a predicted increase is
government spending, although this too is expected to fall within a six-month
time frame.
The combined effect is that the economy will
sink into a deeper slump, the centre said.
Deloitte Research reiterated that the economy
is expected to grow by between 4 and 4.3 per cent this year on rising domestic
demand, against a backdrop of Europe's escalating debt crisis and the Kingdom's
relatively fragile political environment.
"The outlook for the Thai economy is
mixed," the research house said in its "Asia-Pacific Economic
Outlook".
Domestic demand could increase on rising
income in the agricultural sector after a good harvest and improved consumer
and business confidence following the election, it said.
Despite the high level of Thai exports, the
escalation of the euro-zone debt crisis and a likely US economic slowdown could
potentially damage the export sector, it added.
Thailand's inflation eased to a six-month low
in September as fuel prices slid, countering an increase in food costs after
the worst floods in 50 years damaged crops.
The Consumer Price Index grew 4.03 per cent
year on year, compared with 4.29-per-cent growth in August, said Commerce
Ministry permanent secretary Yanyong Phuangrach.
The Bank of Thailand may keep the benchmark
interest rate unchanged at its next meeting because inflation will continue to
ease as oil prices decline, he said.
"The Bank of Thailand's response to
rising inflation has been aggressive, and inflation levels may recede to 3.5
per cent by 2012," said Deloitte Research, which expects inflation to be
in a range of 4.2 to 4.4 per cent this year.
Combating inflation remains a major challenge
for policy-makers when they meet on October 19, it said. September inflation
was marginally above the consensus of 3.9 per cent but much lower than the
August level, convincing Barclays Capital that there will be no more policy
rate hikes this year or in the first half of 2012.
Kasikornbank CEO and president Banthoon Lamsam
said last weekend that loan growth next year would slow unless the European
Union's debt crisis were ended quickly.
"We are monitoring the situation in the
euro zone over the next few days, as the effects might spill over to the
region, including Thailand. If the crisis cannot be resolved, the global
economy might return to a backward trend next year," he said.
In a telephone interview, Apisak
Tantivorawong, president of Krung Thai Bank, said major banks were projecting
loan expansion next year to be two to three times the growth in gross domestic
product.
Krung Thai Bank conservatively predicts loan
growth at 1.5 times GDP growth, in line with slower economic expansion.
However, the Thai Bankers Association expects
loan growth will be between 6 and 8 per cent next year, in line with this
year's level, said its chairman, Chartsiri Sophonpanich.
The European debt crisis will continue to
affect financial markets, but it will not have a significant impact on the
local economy, he said.
He added that the euro-zone debt crisis would
not affect lending by the Thai banking sector next year if Asian countries
could maintain growth and create opportunities for investment.
Sukdee Chongmankhong, chairman of the Credit
Card Club, said in a telephone interview that if inflation and fuel prices were
high next year, spending via credit cards would also be high, unlike commercial
loans, which grow in line with economic expansion.
Business Desk
The Nation (Thailand)
Business & Investment Opportunities
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