What's new in business news: August 19, 2013

Growth slows as exports fall, rising household limits Bank of Thailand & PTT to create own in-house bank.

ECONOMICS

Thai growth slows as exports decrease

Thai economic growth slowed for a second quarter as exports cooled and local demand weakened, with rising household debt restricting the scope for monetary easing.

Southeast Asian countries in general have seen exports falter as growth slows in China, and Europe and Japan  struggle to sustain economic recovery.

The Thai baht has slipped almost 5% against the United States dollar in the past three months, after reaching its highest level since 1997 in April. The benchmark Stock Exchange of Thailand Index has lost more than 10% over the last three months, among the worst performers in Asia.

The central bank cut its 2013 GDP growth forecast to 4.2% from 5.1% on July 19, citing weaker-than-expected exports. 

[Read rest of article here].

ECONOMICS

Soaring household debt limits monetary policy 

The current household debt is estimated at 8 trillion baht, or 80% of gross domestic product (GDP).

Of the total, less than half, or 3.8 trillion baht, came from commercial bank loans. The rest was from state-owned specialised financial institutions (2 trillion baht), cooperatives and other lending sources (1 trillion baht each).

Ideally, the household debt should be around 40% of GDP. There needs to be a balance between corporate, public and household debt in order to sustain financial liquidity.

At its July meeting, the central bank's rate-setting Monetary Policy Committee (MPC) decided to maintain the one-day repurchase rate at 2.5% although domestic consumption was running out of steam, saying growing worries over the rising household debt limited its scope of action for any rate cut.

[Read rest of article here].

BANKING

PTT plans in-house financing

PTT Plc, the national oil and gas conglomerate, is following in the footsteps of multinational firms by setting up an "in-house bank" to secure financing for the company and its subsidiaries.

The PTT Group has 300 firms operating across the region and each one requires massive capital investment every year. Just the parent company alone, PTT, needs 300 billion baht in new capital annually. A third of the group's 300 firms operate internationally to some extent.

PTT's in-house bank will be set up in Singapore because of greater flexibility compared with stringent Thai regulations.

Commercial banks in Thailand must comply with central bank rules on single lending limits, capped at 25% of their risk capital, to companies within a single group (exceptions can be made on a case-by-case basis).

[Read rest of article here].