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BoT pushes local banks to cut lending rates
The BoT moves come after Prime Minister Srettha Thavisin had a meeting with some of the most important banks CEOs and asked them to cut their lending rates for fragile groups.
The Bank of Thailand (BoT) is working with commercial banks to adapt their models to help vulnerable customers.
Key Takeaways
- The Prime Minister requested commercial banks to cut lending rates to protect vulnerable groups.
- The Monetary Policy Committee of the Bank of Thailand won’t cut 2.5% rates.
- Thailand’s economy is expected to grow 2.8% during 2024, shifting to a lower level of growth from its initial 3.2% projections.
The BoT moves come after Prime Minister Srettha Thavisin had a meeting with some of the most important banks CEOs and asked them to cut their lending rates for fragile groups.
Piti Disyatat, the assistant governor for the monetary policy group at the central bank, stated that banks are equipped with the flexibility to adapt their business models. This includes altering product offerings and interest rates to assist vulnerable borrowers in reducing their debt burden, in accordance with economic conditions, market dynamics, and the individual bank’s cost of funds.
Thailand’s household debt-to-GDP ratio is relatively high at 91%, compared to the average of 60% among other emerging economies.
The prime minister, Srettha Thavisin, had previously pushed the central bank to lower borrowing costs from decade-high levels. However, at its latest meeting on April 10, the regulator decided to keep the policy rate unchanged at 2.5% for a third consecutive meeting, noting that the Thai economy is sustaining its growth trajectory, surpassing the 2023 level.
Thailand’s largest commercial banks have agreed to temporarily reduce borrowing costs for vulnerable groups and small businesses, in response to a request from Prime Minister Srettha Thavisin earlier this week. According to a statement released by the Thai Bankers’ Association on Thursday, the lenders will decrease the minimum retail rate for loans by 25 basis points for a period of six months. The minimum retail rate for loans currently varies from 6.5% to 9% among Thai commercial banks.
The lenders will slash the minimum retail rate for loans by 25 basis points for six months, the Thai Bankers’ Association said in a statement Thursday. The MRR for loans ranges from 6.5% to 9% among Thai commercial banks.
The Thai Economy Overview
Thailand’s economy is expected to grow 2.8% during 2024, shifting to a lower level of growth from its initial 3.2% projections.
The current situation that the Thai economy is facing is attributed to a combination of factors, including the slow return of demand from major export markets and a global shift towards value-added services that require higher local skills and capabilities.
The country is currently struggling with low productivity and poor education, having a large number of workforce in low-paid, low-skilled jobs.
Last year the country grew only 1.9%, meanwhile, some of its neighboring countries showed a higher growth of 5% figures.
There are some hopes that different industries like crypto, technology, and tourism could help the country’s economies to improve.
The country’s chance of economic prosperity may indeed depend on its ability to maneuver through the middle-income trap and introduce the type of reforms that will help stimulate growth and innovation.
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