Realty, retail to spur trade NPL
NON-PERFORMING business loans this year will be largely contributed by the property and retail sectors because of matured supply and ongoing weak purchasing power, according to TMB Analytics.
NPLs in the property sector are expected to surge by 22 basis points to 4 per cent, while loan demand from this sector is expected to grow by only 3.8 per cent, down by 5.2 percentage points year on year because the property supply is becoming mature.
However, the highest NPLs still be seen in the commercial and trading sector. TMB Analytics expects bad debt in this sector to expand to 4.45 per cent from 3.9 per cent in 2015.
Naris Sathapholdeja, senior vice president of the research house, said NPLs in the property sector could result from medium-sized property developers upcountry having trouble selling residential units.
Meanwhile, community-mall developers have faced less shopper traffic, so occupancy rates for retail space are low as well.
Earlier, community malls were all the rage, but the economic slowdown has hurt consumers’ purchasing power, and the developers of this type of mall are not big names like listed retailer developers.
Overall NPLs in the banking industry this year will touch 2.63 per cent, TMB Analytics said, up by 8 basis points from 2015, while lending growth is expected to be 4.1 per cent, slower growth than last year’s 4.3 per cent.
Business loans should expand by 3.6 per cent, mainly from the construction industry if the government sticks to its announced investment schedule.
As for the Thai economy, TMB Analytics says private investment will be needed to drive growth in gross domestic product. The research house has forecast GDP growth of 2.8 per cent, but that would require a 3.1-per-cent expansion in private investment and 15-per-cent growth in government investment. Otherwise, GDP growth might be no more than 2.5 per cent.
Previously, TMB Analytics revised down its projection on GDP growth this year from 3.5 per cent to 2.8 per cent because it was clear the export sector would not return to its former health, so investment was the only hope for the economy apart from tourism.
The research house has slashed its forecast for the export sector this year from growth of 1.8 per cent to a 4.5-per-cent contraction.
Thailand will not see double-digit growth in export value any more because countries worldwide have shifted their growth mode from a manufacturing base to a service base, Naris said.
Low inflation has closed off the chance for the Bank of Thailand to raise the policy interest rate, but the fragile global economy and the strengthening baht might encourage the central bank to reduce the rate.
“We think if the central bank does cut the policy rate, it should do so in the first half of this year, because the US Federal Reserve will raise its rate in the second half,” he said.
