February 9, 2017 / 9:53 AM / a year ago

UPDATE 1-Thai banks' loan growth to pick up this yr as economy improves - cbank chief

* Sees 2017 banks’ loan growth above last year’s 2 pct rise

* Sees NPLs falling this year as economy improves (Adds detail)

BANGKOK, Feb 9 (Reuters) - An improving Thai economy is expected to see commercial banks’ loan growth this year top the 2 percent rise of 2016, the central bank governor said on Thursday.

Governor Veerathai Santiprabhob said businesses have been accessing funds via the debt market to compensate for last year’s slowest loan growth in seven years..

“Loans are likely to improve from last year as bond yields are higher, making debt issues more expensive, so operators should return to bank loans,” the central bank chief told reporters.

“As the economy is improving, we’ve started to see investment in some businesses,” he added.

As conditions become more positive, banks’ non-performing loans are expected to decline this year, Veerathai said.

NPLs had risen to 2.83 percent of total lending at the end of 2016, from 2.55 percent at the end of 2015.

Faced with sluggish exports and domestic demand, the military government has ramped up spending and investment projects in a bid to revive growth in Southeast Asia’s second-largest economy, which lags regional peers.

Veerathai said the economic recovery had become broader-based in several business sectors, especially in the provinces benefiting from higher commodities prices and government spending.

On Wednesday, the central bank left its key interest rate unchanged at 1.50 percent, where it has been since April 2015.

Policymakers are counting on a solid uptick in spending to support growth in the face of external headwinds, including from protectionist policies under U.S. President Donald Trump and expectations for a higher pace of U.S. rate increases.

The central bank is forecasting economic growth at 3.2 percent this year, with no export growth. It will review the projections next month. (Reporting by Kitiphong Thaichareon; Writing by Orathai Sriring; Editing by Shri Navaratnam)

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