FTI urges Finance Ministry to facilitate an increase in loan guarantees for SMEs

 

Although the Cabinet has approved the move, the ministry is yet to act. 

Meanwhile, the Thai Industries Sentiment Index (TISI) dropped to a seven-month low in April but industrial sentiment for the next three months improved compared with March.

“I am extremely worried as SMEs are entering a credit crisis because they are unable to gain access to loans while a continuous slowdown of domestic consumption has led to the current lack of liquidity among SME operators,” said FTI chairman Supant Mongkolsuthree.

“In SMEs’ lifecycle there are ups and downs and they need to be able to gain access to loans now in order to survive until the end of the year. After that, the economy is expected to be better from improvements in the export sector and the global economy next year,” he said.

“This measure [providing SMEs access to loans] was introduced during the major flooding in 2011 and the economy was able to bounce back right away in 2012, and such a measure is needed again now. I have been talking about this matter for a year already, since SMEs really need this help.” 

The FTI forecasts Thailand’s gross domestic product will expand by 3.5 per cent this year but it hinted there might be a revision to the prediction in June because of a slowdown in domestic demand, as reflected in a decline in sales in durable and superfluous goods such as cars.

Surapong Paisitpattanapong, FTI vice chairman and spokesman of its Automotive Industry Club, said passenger car sales in the first four months of 2015 dropped by 15.3 per cent compared with the same period last year, when 251,845 cars were sold from January to April.

He said high household debt, the economic slowdown and auto-leasing companies’ reluctance to lend were the reasons for the decline in passenger-car sales. He said that the rejection rate for car loans had increased to 30-40 per cent from a rate of 10 per cent during economic normalcy. There is a chance the estimation for the production of cars for domestic sale to be lowered from the current prediction of 950,000 units to fewer than 900,000 units in the coming months, he |added.

Supant believes that the economy is still in need of stimulation from the government, especially in terms of state investment on mega-projects and measures to help SMEs and farmers, who have been hit by low crop prices and drought.

The TISI has declined for four consecutive months – from 92.7 points in December to 87.7 points in March and 86.2 points last month because of the economic slowdown and drought. Scores below 100 indicate negative sentiment.

These factors have affected people’s purchasing power and contributed to a lower level of orders and sales.

Nevertheless, industrial sentiment for the next three months increased from 100.4 points in March to 102.1 in April.

In the latest poll by the National Institute of Development Administration, 50.6 per cent of the 1,251 industrial operators who answered the survey believed that the economy would be “stable” in the second half of the year.

Around 23 per cent of the respondents, mostly SME operators who depend on domestic sales, believed that the economy would be “worse” and about 22 per cent expected the economy to be “better”.

“The expected acceleration of government budget disbursement towards the end of the fiscal year and the expected improvement in the export sector from the 3-per-cent deprecation of the baht after the consecutive cuts in the policy interest rate are among the reasons for the increased industrial sentiment for the next three months,” Supant said. Finance Minister Sommai Phasee promised this month that the government would introduce more stimulation measures to help SMEs and farmers this year.