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BOT rues cheap imports

BOT bangkok one Feb 12 2024

The Bank of Thailand has expressed concerns over the reduced competitiveness of local small businesses due to an influx of inexpensive Chinese imports.

The Thai market has been flooded with low-cost Chinese consumer goods, impacting the competitiveness of small and medium-sized enterprises (SMEs).

Piti Disyatat, the central bank’s assistant governor for the monetary policy group, highlighted the challenges faced by domestic manufacturing in competing with imported goods.

According to central bank data, imported consumer goods made up 24% of total imports in the first quarter of 2023, with 9.1% originating from China. The proportion of imported Chinese consumer goods has been steadily increasing over recent years.

The Bank of Thailand’s Monetary Policy Committee meeting discussed the country’s weakened competitiveness due to structural challenges, impacting Thailand’s long-term growth potential.

The economy has encountered persistent obstacles, particularly in the manufacturing and SME sectors. The manufacturing sector has experienced a decrease in inventories for eight consecutive quarters, while the fragile SME segment is slow to recover from the pandemic.

The committee acknowledged the importance of managing the credit quality of SMEs. Despite reductions in the debt-to-GDP ratio for both business and household segments, the ratio remains high, standing at 90.9% for households and 84.7% for businesses at the end of the third quarter of 2023. Mr. Piti noted that it will take considerable time to address this financial imbalance.

Despite a decade of low-interest rates in the Thai financial market, the profitability of local companies has declined. Although the policy rate was reduced from 3.25% in 2011 to 0.5% in 2020, the proportion of low-profit firms increased from 4% in 2011 to 7% in 2022.

The central bank subsequently raised the policy rate from 0.5% in August 2022 to 2.5% at present. This may lead to tighter credit conditions and more rigorous credit standards for small businesses in certain industries. However, Mr. Piti mentioned that most businesses can still manage their debts and access new funding, even though new loan growth is lower than pre-pandemic levels.

To support vulnerable borrowers, including SMEs and individuals, the central bank has put in place long-term debt restructuring and targeted measures under a responsible lending approach to address debt issues sustainably.

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