BOT watches personal lending, property loans

The bank would impose some measures to prevent problems such as over-stretched households or real estate bubbles, Paiboon Kittisrikangwan, assistant governor of the Bank of Thailand, said last week in an exclusive interview with Nation Multimedia Group. 

The central bank will hold its annual symposium today and tomorrow. Young economists will present interesting papers to the public. 

Their research includes the reasons why the central bank must be independent from political intervention and the implications of the central bank’s book losses. These are hotly debated issues now.

 

The monitoring is in place, though the central bank acknowledged greater risks of economic slowdown. 

 

“While the risk of inflation has subsided, the risk of economic slowdown has increased,” Paiboon said.

Global inflation has eased as oil prices have dropped recently, so the threat of inflation in Thailand has abated, he said. 

The latest round of quantitative easing (QE) by the US Federal Reserve will have a muted impact compared to the previous two rounds of QE. The Fed injected US$1.7 trillion (Bt52.34 trillion) into the economy in 2008 via long-term bond purchases, followed by $600 billion in 2010. The Fed now plans to buy new long-term bonds worth about $40 billion per month. 

“QE saves the US economy from falling into an abyss. It does not necessarily lead to more bank lending or corporate borrowing or faster economic recovery,” he said.

American banks will not lend more to support the economy if they see bleak prospects for a recovery. Then liquidity will come back to the Fed, he said. 

The US economy is expected to expand at only about 2 per cent this year. It will take time for the major economies – the US, Europe and Japan – to fully rebound from the economic slump, he said. 

QE would work through the capital market with little impact on the real economy, he said. The latest QE comes as a threat of global inflation has subsided.

The central bank has not lowered the policy rate from the current 3-per-cent level because it has to take into account the steep rise in bank loans, which last month surged 16-17 per cent, which was quite high. 

Due to lively lending, a rate cut may not be appropriate. Some lending, particularly for consumption, shot up 30 per cent, he said. 

Taking into account inflation, the real interest rate is close to zero, which is quite supportive of economic growth. The central bank is also keeping a close eye on household debts and property loans.