Thai banks are stepping up loan-loss provisions as they brace for the potential fallout from a prolonged conflict in the Middle East, while also preparing to assist a growing number of financially vulnerable customers.
Amid slowing economic growth in Thailand, existing at-risk groups — particularly small businesses and households — are facing increased difficulty in meeting debt obligations, according to Payong Srivanich, chairman of the Thai Bankers’ Association.
Speaking on Wednesday following a meeting of the Joint Standing Committee on Commerce, Industry and Banking, Mr Payong said the ongoing conflict has widened the pool of vulnerable borrowers. As a result, banks must focus on managing both previously identified risk groups and newly emerging ones.
“Even previously resilient sectors are becoming vulnerable as oil and raw material prices surge. Many businesses are being forced to rethink their models, as traditional approaches are no longer viable under current conditions,” he said.
Heightened uncertainty surrounding the war — combined with rising energy costs, raw material prices and transportation expenses — has made it increasingly difficult for operators to plan ahead. In response, some businesses have temporarily halted production.
“Certain companies have scaled back operations, paused production, or even shut down entirely as they struggle to absorb rising costs. Others have reduced fleet sizes to manage expenses,” Mr Payong added.
Despite some factory closures, he noted that the situation has yet to escalate into a widespread crisis across all industries. Nonetheless, the banking sector continues to play a critical role in supporting businesses during this period of uncertainty.
While core banking principles remain unchanged, lenders are being urged to strengthen and expand support measures to better reflect the prolonged and unpredictable environment, with close monitoring of economic developments at each stage.
On liquidity support, Mr Payong acknowledged that the situation is becoming more complex. Challenges now extend beyond debt servicing capacity, suggesting that liquidity measures alone may not be sufficient.
Looking ahead, he highlighted potential positive drivers later in the year, particularly from the tourism sector and major global events in Thailand, including the Gastech Conference and the joint meetings of the World Bank and the International Monetary Fund, which are expected to help stimulate economic activity.
However, he cautioned that the upcoming Songkran holiday could still be overshadowed by geopolitical uncertainties.