BANGKOK, 4 May 2015 – CIMB Bank’s research office has expressed concern that the reduced interest rate may create more household debt and a financial bubble.
Mr. Amonthep Jawala, the office chief, had been referring to the Monetary Policy Committee’s move decreasing the benchmark rate by 0.25 percent to 1.5 percent last week.
He explained the event would likely force some investors to move their savings to more lucrative investments, such as Long Term Equity Funds in the real estate sector. Mr. Amonthep is concerned that doing so would create a financial bubble later on.
Furthermore, commercial banks are likely to be more careful when approving loans to prevent Non-Performing Loans, given the high rate of household debt.
Mr. Amonthep stated that reducing the benchmark interest rate to stimulate economy may work in a short term, but in a long run he suggests using various financial policies, ramping up infrastructure investment, and improving private investor confidence.
He also advised exporters to spread the risk by expanding their markets to neighboring countries.
