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  • Raising inequality posing credit risks for sovereign in APAC countries

    Governments with weaker social protection systems and tighter fiscal positions will face tougher challenges in tackling income inequality

    The post Raising inequality posing credit risks for sovereign in APAC countries appeared first on Thailand Business News.

    Moody’s Investors Service says in a new report that the impact of the coronavirus pandemic will exacerbate income inequality in APAC, posing credit risk for sovereigns across the region and in particular for those with weaker fiscal capacity and social protection systems.

    “Growth in APAC has outpaced other regions globally for decades. Although this has reduced poverty, it has been accompanied by increases in income inequality for nearly half of Moody’s rated APAC sovereigns,” says Anushka Shah, a Moody’s Vice President and Senior Analyst.

    “The shock from the pandemic will make these inequality gaps starker as it hits vulnerable and lower income groups disproportionately.”

    Anushka Shah, a Moody’s Vice President and Senior Analyst

    Rising disparities could spur governments to intervene with fiscal policy. Spending on social measures typically reduces income disparity.

    But nearly all APAC emerging and frontier markets, barring a few exceptions, have weak redistribution systems, although efforts to strengthen these systems are underway.

    Tax policies, particularly the use of progressive income taxes, can also address income inequality, but only when tax leakage or evasion is minimal. In APAC – with the exception of some advanced economies – the role of taxation in reducing inequality has been limited, since personal taxes account for a small share of tax revenue and they are not aligned with taxpayers’ capacity to pay.

    Over the long term, governments with weak social systems and limited scope to raise fiscal spending will face particular challenges in tackling income inequality. India, Indonesia and, to some extent, Malaysia and the Philippines stand out in this regard. Frontier markets such as Papua New Guinea and Sri Lanka face similar pressures.

    Low revenue constrains the ability of these governments to shore up financing for spending on social transfers. If growth remains below pre-pandemic rates, these governments may face tough choices between addressing inequality before it has persistent and wide-ranging effects – particularly, but not limited to, social and political strains – and implementing fiscal consolidation.

    Although China, Hong Kong SAR and Singapore have high income inequality, their fiscal space provides leeway in quelling immediate pressures.

    The post Raising inequality posing credit risks for sovereign in APAC countries appeared first on Thailand Business News.

    24 November 2020
    Banking
    https://www.thailand-business-news.com/?p=81624
  • Salary increases in Thailand and Singapore expected to be among the world’s highest in 2021

    Few countries are expected to see a significant rise in the level of real salary increases in 2021, but there are exceptions to this within the Asia Pacific region

    The post Salary increases in Thailand and Singapore expected to be among the world’s highest in 2021 appeared first on Thailand Business News.

    Thailand and Singapore are joint-second place in the Asia Pacific rankings for real salary increases.

    Salary increases for workers in Singapore are forecast to rise to 3.0% in 2021, up from 2.5% in 2020. Upon factoring in the predicted inflation rate of 0.3% for next year, workers in Singapore will see an average salary increase of 2.7% in real terms.

    While down slightly from a 2.9% real salary increase they saw this year, it is one of the highest in the world.

    “Singapore is expected to be the third highest in the global rankings for real salary increases on par with Thailand and Colombia, and second highest in the Asia Pacific on par with Thailand, despite the lower forecasted increase in 2021 compared to what workers saw this year,”

    Lee Quane, Regional Director – Asia at ECA International

    Indonesia leads the way in 2021’s Asia Pacific rankings for real salary increases with a forecast increase of 3.8% – significantly higher than the joint second-place nations of Singapore and Thailand, where the increase is expected to be 2.7% in comparison.

    “Few countries are expected to see a significant rise in the level of real salary increases in 2021, but there are exceptions to this within the Asia Pacific region. One of these exceptions would be Indonesia, which stands out at the top of the list and sees the average real salary increase rise from 2.6% this year to 3.8% in 2021.

    While inflation in Indonesia is expected to continue falling, repeating the trend we have seen in recent years, fewer companies in the country intend to freeze salaries – implying that the nominal salary increases would have risen. In fact, our data shows that although 42% of the companies surveyed in Indonesia implemented a salary freeze this year, only 24% of these will do so in 2021 – contributing to the rise in average salary increases in the country,” said Quane.

    Top ten forecast real salary increases – Asia Pacific

    Country2021 forecast real salary increase (%)2020 real salary increase (%)
    Indonesia3.82.6
    Thailand2.74.1
    Singapore2.72.9
    Republic of Korea2.61.5
    China2.30.9
    India2.3-0.1
    Cambodia2.12.1
    Bangladesh2.1-3.6
    Taiwan2.03.1
    Japan1.72.1
    • Salaries in Singapore are forecast to rise to 3.0% in 2021 – up from 2.5% this year
    • After factoring in inflation, the average real salary increase in Singapore will be 2.7% – one of the highest in the world
    • Thailand and Singapore are joint-second place in the Asia Pacific rankings for real salary increases
    • The number of Singapore-based companies implementing pay freezes is also expected to drop in 2021, down to 22% from 36% this year
    • Most locations in Asia Pacific are forecasting higher rates of increase in 2021
    • Rates of real salary increases across Asia Pacific are forecast to be 1.7% in 2021

    These are the key findings of the latest Salary Trends Survey published by ECA International, the world’s leading provider of knowledge, information and software for the management and assignment of employees around the world. 

    The post Salary increases in Thailand and Singapore expected to be among the world’s highest in 2021 appeared first on Thailand Business News.

    23 November 2020
    Economics
    https://www.thailand-business-news.com/?p=81614
  • Bank of Thailand steps in to curb recent baht strength

    Bank of Thailand accelerates measures to advance the development of the new Thai FX Ecosystem and to limit excessive currency volatilities

    The post Bank of Thailand steps in to curb recent baht strength appeared first on Thailand Business News.

    In a press release published on the 20th of November, the central bank’s Monetary Policy Committee (MPC) has expressed concerns over the rapid appreciation of the baht as this affects the fragile economic recovery.

    The baht has strengthened by 4.3% against the dollar since the last MPC meeting on Sept 23, third after the Indonesian rupiah (5.3%) and Korean won (5.2%).

    The rapid appreciation of the Baht may affect the fragile recovery of the Thai economy. Throughout this, the Bank of Thailand has closely monitored and intervened in the market as necessary to limit excessive currency volatilities.

    Bank of Thailand, 20 November 2020

    Ms. Vachira Arromdee, Assistant Governor for Financial Markets Operations Group, revealed that the US presidential outcome and the progress of the Covid-19 vaccine development have strengthened confidence in the global economy, resulting in renewed inflows into emerging market economies, including Thailand. 

    The MPC voted unanimously last week to maintain the benchmark policy rate at 0.5% to support economic recovery, saying the economy is expected to recover slowly and needs support from the loosening policy interest rate.

    In addition, to further mitigate pressures on the currency and to address structural issues in the Thai foreign exchange market, the Bank of Thailand has released additional measures as follows.

    1. Allow residents to freely deposit funds in Foreign Currency Deposit (FCD) accounts

    And allow free fund transfers between them. This will enable exporters to effectively manage liquidity and foreign exchange risk. It allows residents to conduct FCD transactions electronically, which reduces transaction costs.

    FCD accounts may also be used for residents to diversify investment into assets denominated in foreign currencies such as foreign equities and gold denominated in US dollar.

     2. Relax regulations regarding investment in foreign securities

    These include increasing investment limits and expanding eligible financial products, in order to expand investment options for residents and enhance portfolio diversification.
                   1) Increase investment limit for retail investors from 200,000 US dollar per year to 5,000,000 US dollar per year. Moreover, there is no investment limit in foreign securities through local financial institutions such as brokerage firms and asset management companies.
                    2) No investment limit in foreign assets for investors regulated under the Securities Exchange Commission (SEC).
                    3) Allow the listing in Thailand of foreign securities such as Exchanged Traded Funds (ETF) that track foreign securities.

     3. Require a Bond Pre-Trade Registration

    Prior to investing in Thai debt securities, investors are required to complete a registration process. Pre-registration will upgrade the bond surveillance system which will allow close monitoring of investor’s behaviours and thereby enable the implementation of targeted measures in a timely manner.

    Similar registration measures have also been adopted in various other countries such as South Korea, Malaysia, and Taiwan.

    The post Bank of Thailand steps in to curb recent baht strength appeared first on Thailand Business News.

    22 November 2020
    Banking
    https://www.thailand-business-news.com/?p=81605
  • Standard and Poor’s maintain Thailand’s credit rating at BBB+

    The agency is confident in Thailand’s finances, in spite of measures needed to respond to COVID-19, resulting in a deficit for 2020-2021 and hiking state debt.

    The post Standard and Poor’s maintain Thailand’s credit rating at BBB+ appeared first on Thailand Business News.

    BANGKOK (NNT) – Standard and Poor’s credit rating agency has kept its level of confidence in Thailand at BBB+, in spite of COVID-19 turmoil and political unrest, but has noted it is monitoring the situation.

    Director of Public Debt Management at S&P Global Ratings, Patricia Mongkolvanich, revealed that the agency has maintained Thailand’s credit rating at BBB+, with a stable outlook due to the country’s fiscal strength and foreign currency reserves as well as low state debt.

    It has assessed that current political problems will not weigh on the economy in the long term and that the administration is working effectively.

    The agency is confident in Thailand’s finances, in spite of measures needed to respond to COVID-19, resulting in a deficit for 2020-2021 and hiking state debt.

    S&P foresees the Thai economy recovering in the medium term and improving by 6.2 percent next year on the back of tourism and state investment. It also sees the Kingdom’s foreign reserves as stable.

    Areas the agency is watching include economic growth and political stability, which may influence social and economic policies in the medium term.

    The post Standard and Poor’s maintain Thailand’s credit rating at BBB+ appeared first on Thailand Business News.

    21 November 2020
    Banking
    https://www.thailand-business-news.com/?p=81599
  • Will RCEP help drive South-east Asia’s Covid-19 recovery?

    The Regional Comprehensive Economic Partnership (RCEP) was finally signed on Sunday November 15, on the sidelines of the annual summit of the Association of South-East Asian Nations (ASEAN).

    The post Will RCEP help drive South-east Asia’s Covid-19 recovery? appeared first on Thailand Business News.

    Marking a significant regional milestone, it is hoped that the RCEP will help its 15 signatories recover from the economic fallout of the coronavirus pandemic.

    As OBG outlined in July, the signing of RCEP represents a major vote of confidence in multilateralism. As the culmination of an eight-year negotiation process, it mandates for the creation of the world’s largest trading bloc.

    The deal’s signatories – namely the 10 ASEAN members plus China, Australia, Japan, New Zealand and South Korea – together constitute 30% of the world’s population and just under 30% of its GDP.

    The 510-page agreement should provide a substantial boost to trade in the region, lowering tariffs, standardising Customs procedures and improving regulatory harmony between its members. Its 20 chapters cover topics from digital procedures to financial services and intellectual property rules.

    “The RCEP is expected to boost the region’s value chains and contribute to the development of all participating economies,” Doan Duy Khuong, chairman of the ASEAN Business Advisory Council 2020, told OBG earlier this year.

    Designed to strengthen regional cooperation and widen market access, RCEP constitutes a rejection of the trend towards protectionism seen across the world in recent years, most notably in the US-China trade war.

    While some less-developed countries still need to be brought up to speed – for example, Cambodia and Laos have been given several years to upgrade their Customs procedures – the agreement has been largely welcomed as an economic win-win for its members, with the US-based Peterson Institute for International Economics estimating that it could add 0.2% to their respective economies by 2030.

    The deal is expected to take effect within two years, after ratification by the member countries.

    RCEP, Covid-19 and China +1

    Crucially, it is also hoped that the provisions in the agreement will enable signatories to combat the effects of Covid-19 more effectively, both individually and as a bloc.

    “We acknowledge that the RCEP Agreement is critical for our region’s response to the Covid-19 pandemic and will play an important role in building the region’s resilience through an inclusive and sustainable post-pandemic economic recovery process.”

    Joint Leaders’ Statement, released on the occasion of the signing.

    A key element of this is related to supply chains: these were severely disrupted by the pandemic, leading countries around the world to recognise the merits of a more diversified approach. In line with this, many companies and government entities that had previously relied mainly on China have adopted a ‘China +1’ strategy, strengthening domestic capacity and setting up factory lines or identifying suppliers in other countries – while still maintaining interests in China.

    RCEP could further facilitate this shift by making it easier to establish a production base in an ASEAN member state and export to the other 14 members of the new trading bloc.  

    Read the rest here

    The post Will RCEP help drive South-east Asia’s Covid-19 recovery? appeared first on Thailand Business News.

    20 November 2020
    Trade
    https://www.thailand-business-news.com/?p=81588
  • Bank of Thailand keeps policy rate at 0.50 percent

    The Committee voted unanimously to maintain the policy rate at 0.50 percent to support economic recovery while placing emphasis on more targeted measures.

    The post Bank of Thailand keeps policy rate at 0.50 percent appeared first on Thailand Business News.

    The Monetary Policy Committee (MPC) assessed that despite the recent better-than-expected outturn, the Thai economy would recover slowly and need support from the continued low policy rate.

    Nonetheless, the economic recovery would remain fragile and highly uncertain. The Committee thus voted to maintain the policy rate at this meeting and to preserve the limited policy space in order to act at the appropriate and most effective timing.

     The Thai economy in the third quarter of 2020 improved more than expected. However, the recovery would remain slow and vary significantly among economic sectors.

    Overall economic activities were projected to take approximately two years before returning to the pre-pandemic level.

    Consequently, the labor market would remain fragile, especially as labor incomes remained low. This would in turn weigh on private consumption, particularly among low-income households, following a phase-out of temporary supporting factors.

    Public expenditure was expected to be lower than previously assessed. The financial system remained sound, despite increasing vulnerabilities given the economic outlook and risks to the financial positions of businesses and households.

    Meanwhile, headline inflation would be less negative in line with increasing energy prices and would stay close to the lower bound of the target range in 2021. Medium-term inflation expectations remained anchored within the target.

    Despite ample liquidity in the financial system and low financing costs, some businesses, especially SMEs, and households in need of liquidity have not gained access to credits. The baht appreciated rapidly against the US dollar owing to risk-on sentiment following the US presidential election outcome and the progress of COVID-19 vaccine development.

    The Committee expressed concerns over the rapid appreciation of the baht as this affected the fragile economic recovery. Therefore, the Committee would closely monitor developments in foreign exchange markets and capital flows as well as consider the necessity of implementing additional appropriate measures.

    Download​​ Press  PDF

    The post Bank of Thailand keeps policy rate at 0.50 percent appeared first on Thailand Business News.

    18 November 2020
    Banking
    https://www.thailand-business-news.com/?p=81582
  • EXIM Bank forecasts Thai exports growth as high as 4 per cent in 2021

    EXIM Thailand President said that the Bank has forecasted Thai export growth of as high as 4%in 2021 attributable to a short-term recovery of global trade and economy from a low base of -10%. Such growth may not be so high as that in 2019 and tends to slow down in the current context and […]

    The post EXIM Bank forecasts Thai exports growth as high as 4 per cent in 2021 appeared first on Thailand Business News.

    EXIM Thailand President said that the Bank has forecasted Thai export growth of as high as 4%
    in 2021 attributable to a short-term recovery of global trade and economy from a low base of -10%.

    Such growth may not be so high as that in 2019 and tends to slow down in the current context and amid the increasing international restrictions.

    Coupled with the opportunities for Thai export to new frontiers less affected by the COVID-19, Thai economy tends to recover faster than several countries around the world.

    According to IMF, of 195 countries/territories, 60 countries/territories or only around 1/3 of all those countries/territories will record 2021 GDP higher than or equal to that in 2019.

    This has reflected the tendency of these countries’ consumer behavior and demand for import of goods to return to normalcy.

    Among those countries/territories, nine are top 20 export markets of Thailand which are China, Malaysia, Indonesia, CLMV (Cambodia, Lao PDR, Myanmar and Vietnam), South Korea and Taiwan.

    Major export goods from Thailand to these markets comprise such industrial products as plastic resin, refined oil, chemicals, cosmetics, soap and skin care products, and such agricultural and processed agricultural goods as fresh fruits, rubber, sugar, tapioca products and beverages.

    The latest statistics of Thai export in September 2020 showed a contraction of only 3.9%, the lowest contraction in 5 months. Thai export in the first 9 months of 2020 contracted by 7.3%, lower than those of several peer countries like Japan, South Korea, Singapore and India.

    The post EXIM Bank forecasts Thai exports growth as high as 4 per cent in 2021 appeared first on Thailand Business News.

    18 November 2020
    Economics
    https://www.thailand-business-news.com/?p=81578
  • Thai banks remain resilient in Q3 2020 but profits declined

    Ms. Suwannee Jatsadasak, Senior Director, Bank of Thailand, reported on the Thai banking system’s performance in the third quarter of 2020 that the Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to support economic recovery from the COVID-19 pandemic.  Debt relief measures, coupled with revisions to rules on […]

    The post Thai banks remain resilient in Q3 2020 but profits declined appeared first on Thailand Business News.

    Ms. Suwannee Jatsadasak, Senior Director, Bank of Thailand, reported on the Thai banking system’s performance in the third quarter of 2020 that the Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to support economic recovery from the COVID-19 pandemic. 

    Debt relief measures, coupled with revisions to rules on loan classification and provisioning facilitated bank loan expansion and alleviated the deterioration of bank loan quality. Meanwhile, banking system’s profitability declined as banks continued to set aside loan loss provision at a high level as a cushion against a potential adverse impact of COVID-19 on loan quality.

    Details are as follows:

    Capital Fund of the Thai banking system was at 2,959 billion baht, equivalent to capital adequacy ratio (BIS ratio) of 19.8%.

    Loan loss provision remained high with NPL coverage ratio of 149.7%

    Loan loss provision remained high at 782.5 billion baht with NPL coverage ratio of 149.7%. Liquidity coverage ratio (LCR) registered at 184.9%.

     In the third quarter of 2020, banks’ overall loan growth stood at 4.6% year-on-year, a slight decline from last quarter at 5.0%. Details on bank loan are as follows:

    Corporate loan (64.6% of total loan) expanded at 4.5% year-on-year, but contracted quarter-on-quarter as some large corporates switched their funding source from bank loan to bond and equity issuance. SME loan1 contracted at a lower rate, attributed to the soft loan scheme and a gradual economic recovery.

    Consumer loan grew at 4.8% year-on-year

    Consumer loan (35.4% of total loan) grew at 4.8% year-on-year, and increased quarter-on-quarter following the relaxation of lockdown measures. In particular, mortgage lending expanded, consistent with an increase in demand for low-rise residential properties from last quarter.

    ​Ms. Suwannee Jatsadasak, Senior Director, Bank of Thailand, reported on the Thai banking system’s performance in the third quarter of 2020 that the Thai banking system remained resilient with high levels of capital fund, loan loss provision and liquidity to support economic recovery from the COVID-19 pandemic. 

    Debt relief measures, coupled with revisions to rules on loan classification and provisioning facilitated bank loan expansion and alleviated the deterioration of bank loan quality. Meanwhile, banking system’s profitability declined as banks continued to set aside loan loss provision at a high level as a cushion against a potential adverse impact of COVID-19 on loan quality.

    Details are as follows:

    Capital Fund of the Thai banking system was at 2,959 billion baht, equivalent to capital adequacy ratio (BIS ratio) of 19.8%.

    Loan loss provision remained high with NPL coverage ratio of 149.7%

    Loan loss provision remained high at 782.5 billion baht with NPL coverage ratio of 149.7%. Liquidity coverage ratio (LCR) registered at 184.9%.

    Loan loss provision remained high with NPL coverage ratio of 149.7%

     In the third quarter of 2020, banks’ overall loan growth stood at 4.6% year-on-year, a slight decline from last quarter at 5.0%. Details on bank loan are as follows:

    Corporate loan (64.6% of total loan) expanded at 4.5% year-on-year, but contracted quarter-on-quarter as some large corporates switched their funding source from bank loan to bond and equity issuance. SME loan1 contracted at a lower rate, attributed to the soft loan scheme and a gradual economic recovery.

    Consumer loan grew at 4.8% year-on-year

    Consumer loan (35.4% of total loan) grew at 4.8% year-on-year, and increased quarter-on-quarter following the relaxation of lockdown measures. In particular, mortgage lending expanded, consistent with an increase in demand for low-rise residential properties from last quarter.

     Debt relief measures, together with revisions to rules on loan classification and provisioning, have continued to alleviate banks’ loan quality deterioration in the third quarter of 2020. The gross non-performing loan (NPL or stage 3) outstanding was at 513.9 billion baht, equivalent to 3.14% of total loan, slightly edging up from 3.09% in the previous quarter.

    Meanwhile, the ratio of loans with significant increase in credit risk (SICR or stage 2) to total loans was at 7.03%, down from 7.49% in the last quarter.

    The banking system recorded net profit of 28.0 billion baht in the third quarter and 130.4 billion baht for the first 9 months of 2020, a decline from last year due to continued high level of provisioning expenses to cushion against potential loan quality deterioration going forward.

    As a result, the ratio of return on asset (ROA) declined to 0.52% from 0.60% in the last quarter. The ratio of net interest income to average interest-earning assets (Net Interest Margin: NIM) declined from 2.60% to 2.55%, largely due to a decline in interest income on loan.

    (1) Corporates with a maximum credit line of 500 million baht with a bank.

    >>​Download​​ Press   PDF 

    The post Thai banks remain resilient in Q3 2020 but profits declined appeared first on Thailand Business News.

    18 November 2020
    Banking
    https://www.thailand-business-news.com/?p=81573