Most Thai CEOs are very worried about rising interest rates, survey finds
Interest rate hikes could dampen purchasing power and investment, according to the results of a survey released by the Federation of Thai Industries (FTI) on Thursday.
FTI vice-chairman Montri Mahaplerkpong said the majority of FTI executives surveyed in the poll about how rising rates would affect the industrial sector expressed concern about further rate hikes.
The Bank of Thailand Monetary Policy Committee raised the annual interest rate by 0.25% on August 2 – from 2.00% to 2.25% – the highest rate in nine years, Montri said. Higher rates result in rising financial costs, he said.
He added that Thailand's interest rate is likely to rise further as several analysts expect the US Federal Reserve to raise its policy rate again late this year.
Montri said rising interest rates affect the industrial sector in two ways. They reduce purchasing power and delay investment.
Consumers become more cautious about spending due to rising interest rates on loans and household debt, he explained. At the same time, businesses may need to raise prices and postpone new investment, he added.
He advised the government to consider measures to mitigate the impact of rising interest rates, such as offering low-interest loans to boost liquidity for small and medium-sized enterprises (SMEs), monitoring the difference between deposit and loan interest rates, improving loan request regulations to enable entrepreneurs to access funds, and delaying interest rate hikes.
The government should also tackle rising household debt, which is affecting the Thai economy, Montri said.
He also advised the government to reduce the cost of living, promote employment, encourage the elderly to work, offer incentives for debtors who repay on time and restructure debts for those who are having problems repaying them.
The FTI poll surveyed 216 CEOs nationwide. The results of the survey are:
Do you worry about interest rate hikes?
60.2%: Very worried
33.3%: Moderately worried
6.5%: Not worried
How do rising rates affect the industrial sector? (Top three choices)
64.8%: Decline in consumer purchasing power due to rising interest on loans and household debt
62.0%: Difficulties in raising product prices and impacts on economic recovery
56.5%: Investment delays and production capacity reduction due to rising financial costs
How can the industrial sector deal with rising rates? (Top three choices)
70.4%: Reduce operating expenses
67.1%: Delay investment and adjust financial management to increase liquidity
42.6%: Restructure debt
What should the government do to help entrepreneurs handle rising rates? (Top three choices)
68.5%: Government banks should offer low-interest loans to SMEs
67.1%: Take care of the difference between deposit and loan interests and improve loan request regulations to enable entrepreneurs to access funds
58.8%: BOT should delay interest rate hike
What should the government do to deal with rising household debt? (Top three choices)
67.6%: Launch measures to reduce the cost of living, including lower utility costs
61.6%: Promote employment, create new jobs and encourage the elderly to work
60.2%: Provide incentives for those who repay debts on time, such as lower interest rates
What will the policy rate be at the end of this year?
37.5%: 2.25% per year (Remain the same)
32.4%: 2.50% per year (Up 0.25%)
30.1%: 2.00% per year (Down 0.25%)
