Private firms 'must shape up'
GDP GROWTH is expected to be in the range of 3-4 per cent in 2016, restrained by the global economic slowdown, the previous government's populist policies and the adjustment of the private sector, Kosit Panpiemras, executive chairman of Bangkok Bank, sai
If the private sector cannot adjust to increasing competitiveness, GDP growth might be confined to the low end like it is now, he said.
The private sector needs to upgrade its technology and develop new products to strengthen its competitiveness, which is not easy to do in the short run. A growth rate of 3-4 per cent is acceptable while the country is waiting for global demand to pick up and the private sector to adjust.
Loan growth of the banking industry should be in line with the actual economic situation. According to Escap’s “Economic and Social Survey of Asia and the Pacific” report, economic growth in Southeast Asia as a whole moderated to 4.3 per cent in 2014 from 5 per cent in 2013.
Thailand was the clear underperformer owing to political unrest, but growth also slowed in Indonesia to the weakest level in five years as a result of monetary tightening and weak commodity exports. Escap forecasts a 3.9-4 per cent economic growth rate for Thailand this and next year, which is below the Asean averages of 4.9 per cent this year and 5.1 per cent next year. The slower growth in global demand hit Thailand’s exports, while the high household debt, which is the result of the populist policies, has dampened consumer spending.
However, the high household debt was not a worry for banks because even if consumers cannot afford their instalments, most household debt is collateralised. “When the country’s growth stays at around 3 per cent, we should acknowledge that that there are fewer opportunities to support businesses, so SMEs in sensitive industries should take care of themselves besides asking for help from financial institutions,” he said.
Bangkok Bank helps SMEs that require credit to overcome their liquidity crunches, support investment or increase capacity to fill orders.
This will help reduce the rise in NPLs among SME customers, besides offering debt extensions.
Commercial loans are 70 per cent of the bank’s portfolio, the highest proportion in the banking industry.
In the first quarter, the bank’s non-performing loan ratio worsened to 2.68 per cent from 2.53 per cent at the end of last year.
The bank has backed off from giving credit to SMEs that want funds to support production for inventory.
It was not good timing for SMEs to do that while consumer demand was flagging, he said.
