BOT may focus on rising bad debts and leave key policy rate untouched

[webfact]

BOT may focus on rising bad debts and leave key policy rate untouched

By The Nation

 

 

The Bank of Thailand (BOT) is likely to leave the key policy rate unchanged during the Monetary Policy Meeting (MPC) today (June 24), analysts say, but warn about rising bad debts.

 

The MPC has cut key policy rates three times this year, from 1.25 per cent to 0.5 per cent, though most analysts expect the central bank to maintain its key policy rate. 

 

Somprawin Manprasert, chief economist at Krungsri Bank, believes the MPC will today unanimously vote to leave the key policy rate unchanged at 0.5 per cent. 

 

“It will be more interesting to watch how the central bank assesses the economic outlook and the quality of banks’ assets instead,” he said.  

 

The central bank’s assessment on the quality of banks’ assets may lead to more measures to address rising bad debts, he said.

 

BOT implemented pre-emptive measures on Friday telling commercial banks to hold off on paying interim dividend and buying back shares. 

 

Somprawin said the current economic situation has not changed and the inflation rate is not putting pressure on the monetary policy, adding that Krungsri Research has been monitoring the economy’s recovery route. He said he expects the economy and people’s income to recover gradually. 

 

He also said it is important for businesses to be resilient, and for them to have adequate capital to resume operations as the government relaxes lockdown restrictions, he said. 

 

Pipat Luengnaruemitchai, assistant managing director at Phatra Securities, shared similar views, saying that the rate will be left unchanged because the economic situation has not changed much compared to the previous time MPC met. Also, the rate cut in the committee’s last meeting went through with a narrow 4:3 vote. 

 

He said he expects the central bank to revise downwards its economic projection of 5.3 per cent contraction, because the pandemic has had a greater impact on tourism than previously thought. Phatra Securities, meanwhile, predicts an economic contraction of 9 per cent this year. 

 

“There are no foreign tourists now. Revenue from foreign arrivals accounted for about 12 per cent of the GDP. We don’t know when they will start returning to Thailand, so it has had a huge impact on the Thai economy,” he said. 

 

He also warned that the Bt1 trillion government stimulus, representing just 5 to 6 per cent of the GDP, may not help much.

 

Naris Sathapholdeja, head of TMB Analytics, also does not think the MPC will cut the rate today. 

 

He said the economy has bottomed out and will take time to recover. The central bank’s greatest worry now is financial stability. If the rate is far too low, then people will be driven to seek high yields and be willing to take higher risks, he said. 

 

The MPC may also want to keep its ammunition for use later in case there is a second-wave of Covid-19 infections. 

 

He said TMB has forecast a 5 per cent contraction this year, adding that though large revenue from foreign tourists is gone, domestic tourists may partially compensate for the shortfall.

 

Last year, revenue from foreign tourists came in at Bt1.9 trillion, domestic tourists Bt1.1 trillion, while Thai outbound tourists spent about Bt440 billion overseas. 

 

If the local big-spenders who go overseas choose to travel domestically, then domestic tourism may generate additional revenue for the country, he said. This way, he added, domestic tourism may stop the economy from shrinking further.

 

Source: https://www.nationthailand.com/business/30390167

 

-- © Copyright The Nation Thailand 2020-06-24

 

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[kingofthemountain]

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Posted 59 minutes ago

BOT may focus on rising bad debts and leave key policy rate untouched

By The Nation

 

 

 

''Somprawin said the current economic situation has not changed and the inflation rate is not putting pressure on the monetary policy, adding that Krungsri Research has been monitoring the economy’s recovery route. He said he expects the economy and people’s income to recover gradually. 

 

He also said it is important for businesses to be resilient, and for them to have adequate capital to resume operations as the government relaxes lockdown restrictions, he said. 

 

Pipat Luengnaruemitchai, assistant managing director at Phatra Securities, shared similar views, saying that the rate will be left unchanged because the economic situation has not changed much compared to the previous time MPC met. Also, the rate cut in the committee’s last meeting went through with a narrow 4:3 vote. 

 

He said he expects the central bank to revise downwards its economic projection of 5.3 per cent contraction, because the pandemic has had a greater impact on tourism than previously thought. Phatra Securities, meanwhile, predicts an economic contraction of 9 per cent this year. 

 

“There are no foreign tourists now. Revenue from foreign arrivals accounted for about 12 per cent of the GDP. We don’t know when they will start returning to Thailand, so it has had a huge impact on the Thai economy,” he said. ''

 

Are these idiots really in charge of the monetary policy here?

How can you write something like ''the situation economic has not changed''

and in the same sentence explain that this is the exact opposite situation ?

[RichardColeman]

4 hours ago, webfact said:

Last year, revenue from foreign tourists came in at Bt1.9 trillion, domestic tourists Bt1.1 trillion, while Thai outbound tourists spent about Bt440 billion overseas. 

I find it hard to believe that the value of Thai tourism is 75% of the total income of foreign tourism.

 I guess it would also put thai gdp based on about 33% tourism, which to me seems dangerously high - as seems to be happening in current times

 

 

[Isaan sailor]

So no rate cut?  That’s just peachy. Let the Baht run wild. No western tourists coming anyway.  And exports?  Maybe China can buy them (no doubt they’d prefer to buy Thai factories).  As long as BoT has high USD reserves—the geniuses at BoT can subsidize the entire economy!

Edited June 24, 2020 by Isaan sailor

[Trillian]

1 minute ago, Isaan sailor said:

So no rate cut?  That’s just peachy. Let the Baht run wild. No western tourists coming anyway.  And exports?  Maybe China can buy them.  As long as BoT has high USD reserves—they can subsidize the entire economy!

Now your posts have become ridiculous, it's been explained to you several times that the problem is USD and not the Baht running wild....are you some sort of paid agitator trying to propagate an anti Thai establishment and anti Chinese message on social networking forums because all your posts have the same thrust, it sure comes across that way.

[Cake Monster]

All this talk about bad debt is starting to sound a little like squeeky Bum time.

[Trillian]

2 minutes ago, Cake Monster said:

All this talk about bad debt is starting to sound a little like squeeky Bum time.

I wouldn't get too concerned, it's the same half dozen core messages that are being repackaged and expressed by different people in different ways and none of them should come as a surprise to anyone:

 

Bad debts and defaults are rising,

Inflation is low so interest rates will remain low,

The strength of THB could be an issue for exporters downstream,

International Tourism revenue is getting hurt,

GDP will get squeezed by greater than -5%.

Exports will take an unknown hit.

 

 

[Brunolem]

1 hour ago, RichardColeman said:

I find it hard to believe that the value of Thai tourism is 75% of the total income of foreign tourism.

 I guess it would also put thai gdp based on about 33% tourism, which to me seems dangerously high - as seems to be happening in current times

 

 

It depends on what is included in "tourism".

 

For example, if they include all the single day visits to national parks, zoos and private venues such as Nong Nooch Garden or the water parks, it all adds up.

 

It also depends how they count domestic flights and long distance travels by bus.

 

The bigger the aggregate numbers, the more they are subject to interpretation...and manipulation...

[Trillian]

1 hour ago, RichardColeman said:

I find it hard to believe that the value of Thai tourism is 75% of the total income of foreign tourism.

 I guess it would also put thai gdp based on about 33% tourism, which to me seems dangerously high - as seems to be happening in current times

 

 

I agree, those numbers are suspect. International tourism (12% of GDP) is valued at USD 62 bill. or about THB 1.88 trill. Domestic tourism (5% of GDP) is valued at around USD 26 bill or about THB 780 bill. - using 30 baht per USD so only approx. But the 440 bill. overseas spending by Thai's seems reliable since that number is seen repeatedly. All of that shows tourism as being worth about 17% of GDP (USD520 bill.) which seems correct, give or take.

 

[Isaan sailor]

49 minutes ago, Trillian said:

Now your posts have become ridiculous, it's been explained to you several times that the problem is USD and not the Baht running wild....are you some sort of paid agitator trying to propagate an anti Thai establishment and anti Chinese message on social networking forums because all your posts have the same thrust, it sure comes across that way.

Au contraire, mon ami.  Just an expat here paying bills and supporting people.  Watching the Baht erode purchasing power, and thus quality of a retired life.

The thrust of most of your comments seem to find China and the CCP faultless.  And we’ve all read about the paid Chinese posters.  At least no one would ever accuse me complicit in Chinese propaganda.

At least I manage to give you thumbs up from time to time...

[kingofthemountain]

52 minutes ago, Trillian said:

I wouldn't get too concerned, it's the same half dozen core messages that are being repackaged and expressed by different people in different ways and none of them should come as a surprise to anyone:

 

Bad debts and defaults are rising,

Inflation is low so interest rates will remain low,

The strength of THB could be an issue for exporters downstream,

International Tourism revenue is getting hurt,

GDP will get squeezed by greater than -5%.

Exports will take an unknown hit.

 

 

You sound like an expert, and in your post you list all the problems

that everyone else could list as they are quite obvious.

But i will be more interested to read what are the solutions at  these

problems you could propose, if you have any?

tyia

Edited June 24, 2020 by kingofthemountain

[Trillian]

9 minutes ago, Isaan sailor said:

Au contraire, mon ami.  Just an expat here paying bills and supporting people.  Watching the Baht erode purchasing power, and thus quality of a retired life.

The thrust of most of your comments seem to find China and the CCP faultless.  And we’ve all read about the paid Chinese posters.  At least no one would ever accuse me complicit in Chinese propaganda.

At least I manage to give you thumbs up from time to time...

Finding China and CCP faultless! Don't be silly, deal in facts man, the subject is bad debt in Thailand!

[Brunolem]

17 minutes ago, kingofthemountain said:

 

But i will be more interested to read what are the solutions at  these

problems you could propose, if you have any?

tyia

Unfortunately there are not always solutions to economic problems. 

 

An economy has too many moving parts, and to make things worse, many of these parts are not under the control of the concerned country. 

 

 

[Trillian]

6 minutes ago, kingofthemountain said:

You sound like an expert, and in your post you list all the problems

that everyone else could list as they are quite obvious.

But i will be more interested to read what are the solutions at  these

problems you could propose, if you have any?

tyia

My 35 cents.

 

Each of the points I've listed has a different solution and a different part to play in this jigsaw:

 

- Bad debts and defaults are rising:

 

Bad debt is a process, much of it will be refinanced, houses will be remortgaged, loans will be rescheduled, they will peak and at some point return to normal levels. The only question is how high will they go and what sort of government subsidies will be put in place, if any. There's not a lot that can be done to change things apart from debt forgiveness or government support, the former is unlikely and the second card has already been played.

 

Inflation is low so interest rates will remain low:

 

Low inflation is a problem for the Thai economy but now there's a risk of deflation. The problem is a lack of demand rather than anything structural so for now the problem is one that can be lived with until demand increases, in fact it's actually helpful.

 

The strength of THB could be an issue for exporters downstream:

 

The heavily contentious strength of the Baht issue! Exporters have seen 29.X exchange rates and they may well see them again shortly, that in itself is not a huge barrier to exports but currently slack demand and disrupted supply chains are. I think BOT may borrow for the bail out loans in USD at a fixed forward exchange rate which will weaken the baht slightly, that would be a good thing, otherwise the main problem on this front is the weakness of USD and that's a US election issue ++.

 

International Tourism revenue is getting hurt:

 

Thailand doesn't care that much about the 12% of GDP that is international tourism as people may think, they believe domestic tourism will help take up some of the slack and that the THB 440 bill. Thai people would have spent on overseas travel will be diverted to domestic tourism. In part this is probably correct and will buy some time for things to return to some sort of normal.

 

GDP will get squeezed by greater than -5%:

 

This is a function of lost international tourism revenue and a probable downturn in other exports, not much to done really except take the hit. 

 

Exports will take an unknown hit:

 

As said.

 

In a nutshell, either you live with the problem and work your way through the downturn or you try to mitigate the effects via subsidies and that could prove expensive.

[kingofthemountain]

5 minutes ago, Trillian said:

My 35 cents.

 

Each of the points I've listed has a different solution and a different part to play in this jigsaw:

 

- Bad debts and defaults are rising:

 

Bad debt is a process, much of it will be refinanced, houses will be remortgaged, loans will be rescheduled, they will peak and at some point return to normal levels. The only question is how high will they go and what sort of government subsidies will be put in place, if any. There's not a lot that can be done to change things apart from debt forgiveness or government support, the former is unlikely and the second card has already been played.

 

Inflation is low so interest rates will remain low:

 

Low inflation is a problem for the Thai economy but now there's a risk of deflation. The problem is a lack of demand rather than anything structural so for now the problem is one that can be lived with until demand increases, in fact it's actually helpful.

 

The strength of THB could be an issue for exporters downstream:

 

The heavily contentious strength of the Baht issue! Exporters have seen 29.X exchange rates and they may well see them again shortly, that in itself is not a huge barrier to exports but currently slack demand and disrupted supply chains are. I think BOT may borrow for the bail out loans in USD at a fixed forward exchange rate which will weaken the baht slightly, that would be a good thing, otherwise the main problem on this front is the weakness of USD and that's a US election issue ++.

 

International Tourism revenue is getting hurt:

 

Thailand doesn't care that much about the 12% of GDP that is international tourism as people may think, they believe domestic tourism will help take up some of the slack and that the THB 440 bill. Thai people would have spent on overseas travel will be diverted to domestic tourism. In part this is probably correct and will buy some time for things to return to some sort of normal.

 

GDP will get squeezed by greater than -5%:

 

This is a function of lost international tourism revenue and a probable downturn in other exports, not much to done really except take the hit. 

 

Exports will take an unknown hit:

 

As said.

 

In a nutshell, either you live with the problem and work your way through the downturn or you try to mitigate the effects via subsidies and that could prove expensive.

Thank you, i agree with most of your solutions and statements

unfortunately i think (For some reasons i don't develop here)

BOT will not going to do what they need to do. In fact they must have acted

already long time ago, now it's not far from too late even if they want (And again i think they don't)

[Trillian]

1 minute ago, kingofthemountain said:

Thank you, i agree with most of your solutions and statements

unfortunately i think (For some reasons i don't develop here)

BOT will not going to do what they need to do. In fact they must have acted

already long time ago, now it's not far from too late even if they want (And again i think they don't)

BOT is uber cautious because they are terrified of a repeat of the '97 crash - that's why they are slow to act, that's why they don't act in the way people expect them to, that's why the Baht is not freely convertible because it means nobody can take a position against it, that's why they don't do more to balance trade and always have a trade surplus and protect home grown business with import tariffs, and so on.

[Brunolem]

2 hours ago, Isaan sailor said:

 

Fact: In holding rates pat, Thailand now has interest rates higher than the EU or the USA. This will continue to attract foreign investors.  They had the option to reduce rates today—but did not.

 

Thailand is hardly the only country with higher rates than the US and EU (and Japan). 

 

But Thailand does not have a global currency and the financial power of these giants, it is not even a developed country! 

 

Malaysia is at 2%, India at 4% and Indonesia at 4.25%...to name a few. 

 

So they should attract foreign investors much more than Thailand, and see their exchange rates rise... but they don't. 

 

It would be too easy if one could adjust one's economic health just by turning the interest rate switch... 

 

 

[Trillian]

58 minutes ago, Bender Rodriguez said:

is the CENTRAL BANK overhere also a private bank for profit like the US FEDERAL RESERVE ?

Countries need an entity to be the head of all financial matters, to administer government policy on finance, conduct oversight and good governance of financial institutions, implement security and protocols and to act as an interface to their counterparts in other countries.  If that entity is private it is not accountable, if it is public it susceptible to influence from incumbent government. It is for those reasons that the Thai central bank is responsible to government for the implementation of policy but is the agent of the crown and the chairman is appointed by the crown. 

 

https://www.bot.or.th/English/AboutBOT/RolesAndHistory/Pages/RolesAndResponsibility.aspx

https://www.bot.or.th/English/AboutBOT/Committee/Pages/CourtOfDirectors.aspx#:~:text=The Bank of Thailand Board consists of the Chairman appointed,by the Minister of Finance.

[sidgy]

On 6/24/2020 at 9:46 AM, webfact said:

BOT implemented pre-emptive measures on Friday telling commercial banks to hold off on paying interim dividend and buying back shares. 

is this a legitimate response, to order banks not to pay dividends. 

Seems to me to be an easy way for those making the decision to make some big money since after they announced this, banking shares tumbled 5% when the SET opened on Monday

[Trillian]

1 hour ago, sidgy said:

is this a legitimate response, to order banks not to pay dividends. 

Seems to me to be an easy way for those making the decision to make some big money since after they announced this, banking shares tumbled 5% when the SET opened on Monday

Yes it's a legitimate response, but that's not really the question you're asking, is it, you're really asking whether anyone made a profit from the move as a result of insider trading? The SET, just like most other stock markets around the world has a function dedicated to monitoring suspicious trades, they do act and people do go to prison or get heavily fined. Personally, if I was holding Thai bank stocks and I heard dividends had been suspended I'd probably offload them also.

[Trillian]

6 hours ago, Brunolem said:

Let's not kid ourselves here...the one and only mandate of the (perverted) Fed is to push the stock market up, and make sure it never goes down never mind how many trillions of fake money it needs to create to achieve this goal...

Clearly you've never invested in the S & P Index.

[Trillian]

Strange news in these strange economic times - Thai retail bank deposits increased 8.1% so far this year. Plus, more SET trading accounts have been opened so far this year than in all of 2019, SET turnover is now on the edge of a turnover record set back in 1992.

 

"This year’s trend marks a reversal of individual investors’ interest in Thailand’s stock market. So far, they’ve bought a net 140 billion baht of domestic equities after selling 21 billion baht in 2019, according to the stock exchange’s data. International investors on the other hand have pulled a net $6.6 billion from Thai stocks this year, adding to a $10 billion selloff in 2018 and 2019". https://www.bloomberg.com/asia

 

So Thai's have been banking cash (who said they were worried whether the banks are safe!) AND investing like crazy in the SET, low interest rates and valuations being two drivers, looks like a consumer led recovery perhaps? 

 

But where's the FDI we saw in early June, large capital inflows in the millions of USD, bonds perhaps?

[Trillian]

It seems the US Fed is also capping dividends and share buy backs by US banks, not that much different from what Thailand is doing.

 

https://www.reuters.com/article/us-usa-fed-stresstests/federal-reserve-caps-bank-dividend-payments-after-pandemic-analysis-idUSKBN23W3AA

[ExpatOilWorker]

2 hours ago, Trillian said:

Strange news in these strange economic times - Thai retail bank deposits increased 8.1% so far this year. Plus, more SET trading accounts have been opened so far this year than in all of 2019, SET turnover is now on the edge of a turnover record set back in 1992.

 

"This year’s trend marks a reversal of individual investors’ interest in Thailand’s stock market. So far, they’ve bought a net 140 billion baht of domestic equities after selling 21 billion baht in 2019, according to the stock exchange’s data. International investors on the other hand have pulled a net $6.6 billion from Thai stocks this year, adding to a $10 billion selloff in 2018 and 2019". https://www.bloomberg.com/asia

 

So Thai's have been banking cash (who said they were worried whether the banks are safe!) AND investing like crazy in the SET, low interest rates and valuations being two drivers, looks like a consumer led recovery perhaps? 

 

But where's the FDI we saw in early June, large capital inflows in the millions of USD, bonds perhaps?

In a tourist related news article in this forum it was mentioned that Thais spend 400 billion baht on overseas travel. With borders closed, that money now have to find a new home.

I spoke to a Thai business owner yesterday and they are doing very well since their business mainly rely on the Thai upper-middle class and they are all stuck in Thailand at the moment.

Government spending including big infrastructure projects are still going full steam ahead, generating some easy money for a selective few. 

Where do put all that found money? Cash is the bank and gambling a bit on the SET.

[Trillian]

8 minutes ago, ExpatOilWorker said:

In a tourist related news article in this forum it was mentioned that Thais spend 400 billion baht on overseas travel. With borders closed, that money now have to find a new home.

I spoke to a Thai business owner yesterday and they are doing very well since their business mainly rely on the Thai upper-middle class and they are all stuck in Thailand at the moment.

Government spending including big infrastructure projects are still going full steam ahead, generating some easy money for a selective few. 

Where do put all that found money? Cash is the bank and gambling a bit on the SET.

I suggested a few weeks ago that Thai spending on overseas travel would partially divert to domestic tourism and everyone laughed and said nobody had any money, it's clear there's plenty of cash floating around  although not always in the places where it's needed most.

[Trillian]

Talking of debts:

 

Revenue collection this year is going to fall well short of target  which means either next years budget will have to be impossibly slim and lean, government will have to operate a large deficit or they will be forced to borrow, again. This puts current bail out borrowing plans into perspective, there are limits to what additional government freebies can be handed out.

 

Also looking forward.....water levels are low and this is classified as a drought year, the likelihood of government bail outs for the agricultural sector are high, yet another expense.

[metisdead]

Off topic posts and replies about the US Fed etc have been removed.  This topic is in the Thailand News forum and is about:

 

BOT may focus on rising bad debts and leave key policy rate untouched