World Economy

Thai SME Debts Point to Problems

Thai SME Debts Point to ProblemsThai SME Debts Point to Problems

Over the past week data coming out from the Thailand government and the private sector are showing signs that could be worrisome in the medium to longer term for the country. Rising household debt, increasing non-performing loans among small and medium-sized enterprises and strengthening of the baht are all compounding the problems.

According to the Bank of Thailand, bad loans in the SME sector rose to as high as 4.48% of outstanding loans as of the end of March from 4.35% seen during the fourth quarter of 2016, reported.

Not too long ago, Jaturong Jantarangs, the Bank of Thailand’s assistant governor for the monetary policy group, said soured SME loans showed no signs of declining as a lack of competitive edge and uneven economic recovery hindered businesses’ debt-servicing ability.

“But when it tends to be more about the structural issue, which is Thai SMEs’ lack of competitiveness, it might take longer than two quarters for NPLs to stop increasing,” Jaturong said. “So right now no one can really pinpoint when the increase in NPLs of SMEs will stop or when it will start to decrease.”

He said the uneven economic recovery and structural problems faced by some business sectors undermined the debt-servicing ability of both households and businesses, particularly SMEs.

Higher bad SME loans and household debts have been cited as among the key reasons for the lack of consumption to drive economic growth.

The SME sector plays a vital role in the development of the economy all across this region. A recent report said that Thailand alone has as many as 360,000 SMEs that generate close to 10 trillion baht ($298.6 billion) in revenue annually and employ about 11 million people.

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