Tourism expected to keep Thai growth steady despite fall in exports: Kasikorn Research

Recent problems faced by some Western banks will have limited impact on Thailand, it said in a report.

Thanyalak Vacharachaisurapol, its deputy managing director, said: “Based on the latest data, the difficulties faced by small- and medium-sized US banks are set to be protracted. As long as these closely watched banks fail to fix their balance sheet woes, as evidenced by deposit concentration or interest rate risk management, depositors’ loss of confidence will persist."  

It may take some time before US policymakers decide how to prevent a crisis as they want to avoid using taxpayer money, Thanyalak said.

Any takeover of troubled banks by other financial institutions is unlikely to occur soon and an eventual shutdown of ailing banks may be almost inevitable, Thanyalak added.

Swift action by the US Federal Reserve and other central banks to shore up liquidity in the banking system may prevent the situation from escalating into a global financial crisis, the centre said.

It advised paying close attention to decisions on improving banking laws in the US to ensure their stringent enforcement with small and mid-sized banks.

Any new banking regulations that are enacted may prompt these banks to adopt a more prudent approach to lending. The impacts would likely be reflected in their operating performance over the medium term. 

Nattaporn Triratanasirikul, Kasikorn Research deputy managing director, said the US economy may grow at a slower rate due to ongoing struggles in its banking sector.

The US economy is highly likely to tip into a recession at some point during the second half of this year, the centre said.

This concern is reflected in the Fed’s slowing momentum in raising its policy rate by 0.25% at the Federal Open Market Committee (FOMC) meeting earlier this week. Before the failure of two US banks, the market expected the Fed to raise its policy rate by 0.50%.

A slowdown in the US economy may affect Thailand through trade channels, particularly the export sector.
Thailand’s inflationary pressures have eased in line with ebbing energy prices, caused by the global economic slowdown. As a result, Kasikorn Research has revised its headline inflation rate for Thailand downward, to 2.8% from 3.2 %.      

A stronger than expected recovery in tourism may help offset slowing growth in other segments. Kasikorn Research forecasts that Thailand will welcome 28.5 million tourists this year, up from the previous estimate of 25.5 million.

Consequently, it is forecasting GDP growth of 3.7 % this year despite a number of uncertainties in the global economy that need to be monitored closely. 

It expects the baht to remain highly volatile in the second quarter of this year. However, the Fed's less aggressive policy-rate hikes may cause the baht to strengthen.
Thailand’s Monetary Policy Committee is expected to raise its policy rate by 0.25% at its upcoming meeting on March 29.

The recent problems faced by some Western banks have had a limited impact on Thailand as Thai commercial banks have sound balance sheet diversification.

Their loan portfolios are larger than their investments and are evenly distributed among retail, SME and corporate customers. Moreover, their deposits are not concentrated in high-net worth individual or large corporate clients, as is the case of some troubled US banks.

Moreover, Thai commercial banks have sufficient levels of capital and liquidity, and remain competitive in the global arena while being under close supervision by the Bank of Thailand and the Ministry of Finance.