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Financial Doomsday Unveiled: Thailand Braces for an Unprecedented Rate Hike! Will the Economy Survive this Shocking Turn of Events?

Montri Mahaplerkpong, who serves as FTI vice-chairman, disclosed that the majority of the federation’s executives who participated in a survey fear the implications of the augmenting interest rates on the industrial sector. According to the terms laid down by the Bank of Thailand’s Monetary Policy Committee, the annual interest rate received an augmentation of 0.25% on the 2nd of August, soaring from 2.00% to 2.25%. This is the pinnacle it reached in the past nine years, Montri highlighted. This increment in the rates catalyzes a surge in financial expenses,” he opined.

Moreover, he insinuated that the prospects look likely for another increase in Thailand’s interest rate. This speculation is anchored on the predictions made by numerous analysts predicting a possible surge in the policy rate by the US Federal Reserve towards the end of this calendar year. According to Montri, this increment levies a twin impact on the industrial sector. The rising interest rates suppress purchasing capacity and trigger a postponement in investments. He narrated the predicament of the consumers who curtail their spending patterns due to loan and household debts. Concurrently, businesses might have to escalate their prices and postpone their investments.

Montri pleaded with the government to mull over measures that can alleviate the burden of the rising interest rates. His recommendations included low-interest loans to stimulate liquidity for small and medium-sized enterprises (SMEs), closely observing the disparity between deposit and loan interest rates, improving loan request regulations to allow entrepreneurs to access funds, and postponing interest rate hikes. He further entreated the government to address the plague of escalating household debt distressing the Thai economy, and shared his insights on how the government should occasion a dip in the cost of living, boost employment, propel the elderly to maintain their jobs, offer incentives for early debtors who reimburse on time, and restructure debts for debtors struggling to pay up.

About 216 CEOs nationally were sampled in the FTI survey and the findings of the survey were as follows:

Survey Question: Are you worried about rising interest rates?

  • 60.2%: Very worried
  • 33.3%: Moderate concern
  • 6.5%: Not bothered

Survey Question: How does the industrial sector react to the rising rates?

  • 64.8%: Slump in consumer purchasing power due to skyrocketing interest on loans and household debt
  • 62.0%: Complications in boosting product prices and economic recovery impacts
  • 56.5%: Procrastinations in investments and production capacity reduction due to sky-high financial costs

Survey Question: How can the industrial sector react to the rising rates?

  • 70.4%: Cut down operational expenses
  • 67.1%: Delay investments and adjust financial management to hike liquidity
  • 42.6%: Restructure their debts

Survey Question: What do you think the government should do to assist entrepreneurs dealing with rising rates?

  • 68.5%: Government banks should avail low-interest loans to SMEs
  • 67.1%: Address the gap between deposit and loan interests and improve loan request regulations for entrepreneurs to easily access funds
  • 58.8%: BOT should postpone the interest rate hike

Survey Question: What do you think the government should do to manage rising household debt?

  • 67.6%: Implement measures to lower the cost of living, including reducing utility costs
  • 61.6%: Encourage employment, build new jobs, and incite the elderly to maintain their jobs
  • 60.2%: Offer incentives to those who repay their debts promptly, by way of decreased interest rates

Survey Question: What would be the policy rate by the end of this year?

  • 37.5%: 2.25% per year (stagnant)
  • 32.4%: 2.50% per year (up 0.25%)
  • 30.1%: 2.00% per year (down 0.25%)
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