- Financial conditions: Nominal interest remained unchanged but real interest rates declined as
inflation accelerated. Bank deposit expanded at a slower pace than that of credit. Credits extended
to business sector increased for the first time since the beginning of 2007. As a result, liquidity
has declined. The Thai baht continued to appreciate in nominal terms as compared to the USD, but depreciated in real effective terms. SET index was volatile due to the fluctuation in foreign capital movement.
- Policy rate was kept unchanged at 3.25 percent. During the fourth quarter, the Monetary Policy Committee (MPC) decided to maintain the policy rate at 3.25 percent in response to the recovery in domestic demand and upward pressures on inflation. In 2007, BOT cut policy interest rate 5
times, from 5 percent at the end of 2006 to 3.25 percent at the end of July 2007.
The Federal Reserve Board lowered Fed Fund Rate 3 times in the fourth quarter from 5.25 percent in
September to 4.25 percent at the end of year. In 2008, Fed fund rate was cut further on January 22 and January 30 and leaved the rate at 3.0 percent. The aggressive cut was in a bid to revive the weakening economic conditions and prospects. The European Central Bank and the Bank of Japan maintained their policy rate at 4.0 and 0.5 percent respectively.
- In line with the policy rate, time deposit and lending rates offered by commercial banks were on hold. However, real interest rate declined due to inflation accelerated. Average 3-month and 12- month time deposit rates of five major commercial banks have remained at 2.13 and 2.32 percent
respectively since July 2007. The MLR lending rate was averaged at 6.99 percent per annum. Adjusted
by accelerate inflation rate, the real 12-month time deposit rate turned to negative of 0.89 percent while
the real lending rate declined to 3.78 percent. Overall, in 2007, commercial banks’ time deposit
and lending rates declined by 219 and 76 bps respectively, in accordance with policy rate reduction of 175 bps.
- Commercial banks’ deposits slowed down. At the end of the fourth quarter, deposits expanded by 0.1 percent from the same period of last year, decelerating from that of 2.2 percent in the third
quarter. This was mainly due to, the decline in deposit rates, the shift of time deposit toward other
financial instruments, such as BOT bond and RMF/LTF, to take advantage of tax privileges, and the increase in the bills of exchange issued by commercial banks in order to avoid remittance to Financial Institutions Development Fund.
- Commercial banks’ credits accelerated by 3.9 percent at the end of the fourth quarter compared to that of 1.2 percent at the end of the third quarter. Household credits expanded rapidly by 8.4 percent, led by housing loans.
However, it slowed down from the beginning of 2007. Loans to corporate sector showed a sign of
recovery, expanding by 0.6 percent, partly in line with picking up in private investment. Loans to
wholesale and retail sales sector and manufacturing sector expanded by 3.2 and 1.7 percent respectively. In addition, loans for real estate activities had accelerated. However, loans to financial intermediation and agricultural sector decelerated, and loans to construction sector declined for the first time since the mid of 2006. Credit card spending increased in accordance with the expansion in consumer spending in December,
even though credit card outstanding balance and cash advance slowed down. Overall, in 2007, commercial banks’ credits accelerated in the fourth quarter, following the slowdown in the first three quarter.
- Liquidity remained high despite some signs of declining. Credits to deposits ratio stood at 94.8 percent at the end of the fourth quarter as compared to 90.1 and 91.3 percent at the end of third quarter of 2007 and at the end of 2006 respectively. Excess liquidity banking system, estimated as disposable liquidity, was approximately 822.2 billion at the end of December, lower than 909.1 billion at the end of September. However, excess liquidity remained ample compared to that of 702.7 billion at the end of December 2006.
- NPLs in financial institutions (excluding BIBF and credit fanciers) at the end of the fourth quarter declined from the third quarter by 22.8 billion baht, to 237.9 billion baht which is equivalent to 3.95 percent of total credits outstanding at the end of the fourth quarter.
- Thai commercial banks reported net loss of 8.07 billion baht in the fourth quarter, compared to net loss of 14.74 billion baht in the same period of last year and net profit of 9.371 billion baht in the third quarter. While profit from net interest rate income and dividend increased, the loss was mainly attributable to losses investment activities as they were marked to market. In total, Thai commercial
banks reported net profit of 8.64 billion baht in 2007, much lower than that of 54.54 billion baht in 2006.
- Thai baht continued to appreciate in nominal terms as compared to the US dollar but real effective exchange rate weakened. Average exchange rate in the fourth quarter was at 33.89 baht per US dollar, appreciated slightly by 0.34 percent from the third quarter, but appreciated significantly by 7.27 percent from the same period of last year. The appreciation was mainly attributable to various underlying factors including the impact of sub-prime crisis that caused US dollar to depreciate further, and the increase in balance of payment accounted in majority by large current account surplus. In the fourth quarter, the movement in Thai baht against the US dollar and other major currencies was relatively stable. Considering the movement of Thai baht against other currencies, it appreciated against US dollar and Indonesian Rupee but depreciated against other major and regional currencies. Therefore, average nominal
effective exchange rate (NEER) and real effective exchange rate (REER) depreciated by 1.22 and 1.32 percent respectively. For the year 2007, an average exchange rate was at 34.52 baht per US dollar, appreciated by 8.89 percent. Nominal effective exchange rate (NEER) and real effective exchange rate (REER) appreciated by 6.15 and 6.0 percent respectively. In January 2008, Thai baht continued to appreciate to 33.14 baht per US dollar due to the impact of sub-prime crisis that resulted in a further US dollar depreciation.
% change compare with first
2006 2007 2008 haft yea Jan 2,2007 (ร้อยละ)
Dec. Q1 Q2 Q3 Q4 Jan. Q2 Q3 Q4 Jan 07
SINGAPORE DOLLAR 1.54 1.53 1.52 1.52 1.45 1.43 -0.4 -1.0 -5.1 -6.6
INDONESIA RUPIAH 9,020 9,099 8,973 9,246 9,234 9,406 0.3 3.3 3.2 5.1
SOUTH KOREA WON 925.0 939.0 928.7 927.3 920.9 942.1 0.4 0.2 -0.5 1.8
NEW TAIWAN DOLLAR 32.51 32.92 33.13 32.93 32.43 32.36 2.3 1.7 0.2 -0.1
THAI BAHT 35.78 35.54 34.64 34.01 33.89 33.14 -3.9 -5.7 -5.9 -8.1
PHILIPPINE PESO 49.47 48.61 46.90 45.94 43.18 40.94 -4.4 -6.3 -11.9 -16.5
MALAYSIAN RINGGIT 3.55 3.50 3.43 3.46 3.36 3.27 -2.9 -1.9 -4.9 -7.5
CHINA YUAN RENMINBI 7.82 7.76 7.68 7.56 7.43 7.24 -1.6 -3.2 -4.7 -7.2
Source: Bank of Thailand
- SET index was volatile due to the fluctuation in foreign capital market. Average daily trading value was 19.4 billion baht, declined from 21.9 billion baht in the third quarter. SET index closed at 858.1 points, up from 845.5 points at the end of the third quarter. Net sale of foreign investor was recorded at 40.9 billion baht. In the fourth quarter, the market became more volatile. SET index rose to 915.03 points at the end of October, but plunged to 791.71 points in mid December, caused by the spillover
from US sub-prime crisis and oil price fluctuation. Overall, in 2007, SET index increased from 689.74
points at the end of 2006 to 858.10 points at the end of 2007. Net buy of foreign investor declined from
83.4 billion baht in 2006 to 55 billion baht in 2007.
However, worsen economic situation in the US and widespread impacts through financial markets in Europe put SET index under pressure before it plunged to 784.23 points at the end of January 2008.
- Bond trading accelerated. Daily average outright trading increased from 44.6 billion baht in the third quarter to 47.3 billion baht in the forth quarter. Net buy of foreign investors was recorded at 4.6 billion baht. Bond price index declined slightly. Government bond yields increased, particularly those of medium-term maturity. Overall, in 2007, daily average trading volume was at 45.9 billion baht, with the net sale of foreign investor of 40.3 billion baht. Average yield in 2007 decreased slightly and led to an increase in average price index and average return of 2.4 and 7.6 percent respectively.
- Corporate funding (excluding short-term bond) in the fourth quarter was at 66.3 billion baht compared to 15.44 billion baht in the third quarter and 149.3 billion baht in the same period last year. Fund raised by both financial and non-financial sectors registered 37.6 and 28.6 billion baht respectively. The issuance of new initial public offering (IPO) by non-financial corporate increased to 60 percent of total IPO value in 2007. Overall accumulated funding in 2007 was at 69.8 billion baht, declined
from 2006 by 55 percent. Non-financial corporate fund raising declined by 69.8 percent, due to the investment slowdown in private sector and stock market volatility. Moreover, fund raised by financial
sector also declined by 42 percent.
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