Thailand’s loan growth slows to 0.3% in Q2 as SME loans contract

The central bank said there is a need to continue to monitor SMEs’ debt serviceability.

The loan growth of Thailand’s banking system slowed to a 0.3% growth year-on-year (YoY) in Q2 2024, according to data from the Bank of Thailand (BOT).

Loans extended to small and medium enterprises (SMEs) continued to contract, whilst consumer loans expanded at a slower pace due to rising risk. Overall business loans remained relatively unchanged, the central bank said.

BOT said there remains a need to monitor SMEs’ ability to pay back their debt. 

It particularly highlighted SMEs and certain businesses whose performances are affected by structural issues and declining competitiveness, and who have a customer base suffering from low-income recovery.

“These could cause a gradual increase in NPL, nonetheless well-manageable with no immediate risk of an NPL cliff,” The BOT said in a statement posted on its website.

Gross non-performing loans (NPL) increased to THB540.8b, equivalent to an NPL ratio of 2.84%, primarily from consumer loans.

Ratio of loans with a significant increase in credit risk rose to 6.5% from Q1. Large corporate loans contributed to the rise, mainly from debtors who can still meet their contractual debt obligations but are qualitatively classified, BOT said.

The banking system’s profitability in the second quarter improved compared to the first quarter.

“The overall corporate profitability continued to improve, led by an improvement in manufacturing and tourism-related sectors,” the central bank said.