BOT might cut policy rate again if growth sluggish: SCB

The Bank of Thailand might cut the policy interest rate again this year to keep the economy on the growth path amid weakening private consumption, according to Siam Commercial Bank.

Sutapa Amornvivat, chief economist of the bank’s Economic Intelligence Centre (EIC), said yesterday that growth in private consumption this year was expected to drop to 3 per cent from 6.7 per cent last year. The second quarter was likely softer than the first based on the 3-per-cent decline in non-durable goods such as foods and beverages, electricity and tap water from the first three months of the year. 

Household consumption is showing clear signs of simmering down, so the central bank might trim 25 basis points off the policy rate to help sustain economic growth, she said.

However, a rate cut might drive up loan demand, which would put pressure on household debt, currently 80 per cent of gross domestic product. The central bank might launch measures to deal with loan demand.

It might regulate personal loans rather than housing or auto loans, since home loans are not rising as fast as before, while the demand for auto loans is easing after the end of first car scheme.

Last year mortgages increased by 6 per cent, auto loans by 9 per cent, and personal and credit-card loans by 7 per cent. This is not a good time to hike the policy rate because it could worsen the situation for highly indebted consumers, in Sutapa’s opinion.

High household debt is a concern for banks. They are cautious about giving new loans to sectors that might be a risk for them.

According to the National Statistical Office, which surveys debt per income of consumers every two years, in 2011, individuals with monthly income lower than Bt10,000 had a debt burden of 52 per cent, increasing from 46 per cent in 2009, while people with income over Bt10,000 had a debt burden of 25 per cent.

The debt burden of people with income under Bt10,000 should be 30 per cent, she said.

The office included debt from loan sharks, while the household debt that stood at 70 per cent in 2011 before climbing to 77 per cent in 2012 and 80 per cent year to date is in financial system.

Commercial banks alone account for just 22 per cent of household debt, so the situation for them is not critical.

GDP growth next year should be higher than this year. The EIC forecasts economic growth to rise to 4.8-4.9 per cent from the 4 per cent expected this year on the recovery in exports and public investment, Sutapa said.