MPC concerned over tightened loans for SMEs

The Monetary Policy Committee (MPC) has voiced concern that small and medium-sized enterprises (SMEs), already struggling with economic pressures, will find it increasingly difficult to service debts. This, in turn, could lead to tighter lending conditions and a liquidity crunch.

Concerns raised in latest MPC meeting

The concerns were outlined in the report of the MPC’s fourth meeting of the year, held on August 13, with the report released this week.

The meeting highlighted multiple economic risks for SMEs, noting their struggle against cheap imports—mainly from China—higher borrowing costs compared to large corporations, and difficulties in accessing credit.

SMEs facing mounting pressures

According to the report, many SMEs have responded by cutting costs or downsizing operations, while others have proactively shifted business models to stay competitive.

However, the MPC warned that the fragile state of SMEs could lead to rising unemployment, falling household incomes, and reduced capacity to service household debt.

Credit growth remains negative due to higher credit risks, particularly among SMEs and low-income households. Large businesses are also reducing demand for loans amid heightened economic uncertainty, while overall credit quality has continued to deteriorate, especially in SME and housing loans.

Banks charging SMEs higher rates

The MPC noted that SMEs face higher borrowing costs as banks charge them higher interest rates and reduce those rates more slowly than for large corporations.

During the meeting, MPC members discussed banks’ loan approval criteria, expressing concern that restricted access to credit could force many SMEs to cease operations.

The Committee stressed the need to closely monitor credit growth and baht movements, both of which have significant implications for economic activity.

Risks from US tariffs and global slowdown

On the issue of US reciprocal tariffs, the MPC said it was too early to fully assess the impact. While Thailand was not at a disadvantage compared to regional competitors, higher tariffs are expected to slow exports and may push foreign investors to relocate manufacturing bases.

Some members, however, anticipated the export slowdown would be gradual, rather than a sharp drop in the third quarter as previously feared.

Three economic engines slowing

The MPC report also highlighted concerns over a slowdown in three key drivers of the Thai economy:

• Exports: Hit by US tariffs and intensified competition from cheaper imports.
• Tourism: Facing structural changes as declining foreign arrivals reduce income for smaller operators.
• Private consumption: Weakening due to falling incomes among workers.