Insisting that the Thai economy is stable, BOT Governor Veerathai Santiprabhob said it was hardly possible that Thailand would face massive economic bubbles like what happened in 1997. However, he said bubbles were feared in some segments, as individuals moved money from bank accounts to instruments that offer higher returns, or invest in high-risk funds or some real-estate sectors.

Small bubbles have been witnessed in these segments and it would take some time to see if they pose economic trouble.

“They contain risks and could have a long-term impact on the economy as a whole,” he said.

At 1.50 per cent, the BOT’s policy interest rate is near its historical low of 1.25 per cent in 2003. Thai banks now offer only 1.3-1.9 per cent per annum for 12-month fixed deposits.

Veerathai acknowledged that there was some speculation in the property sector, but said the economy as a whole was in a much better position than in 1997. The current-account surplus at US$35 billion is now at 9 per cent of gross domestic product, while foreign short-term debts are low and public debt remains at only 44 per cent of GDP.

Bankers and property developers took note of the central bank’s stern warning.

Property Perfect chief executive officer Chainid Adhyanasakul admitted that there was some speculation in the condominium market. Some units were booked and resold before they were ready for transfer to buyers.

However, he estimated that speculation accounted for only 10 per cent of total purchases, way below the pre-crisis level. Moreover, speculators focus on units priced over Bt5 million.

Bank of Ayudhya executive vice president Nathapol Luepromchai said the central bank apparently wanted to send a warning to developers who plan to build a number of condominiums along extended mass-transit routes, regardless of real demand.

He noted that in that context, a supply glut was possible in some areas as existing projects are facing slow sales. Several potential buyers have delayed their decisions because of low confidence in the economic outlook.

Adisorn Sermchaiwong, senior executive vice president of CIMB Thai Bank, said it was a good idea to monitor individuals’ investments, as some investment assets may not fit some people’s risk appetite.

Recently, CIMBT opened a subscription for TPI Polene debentures and retail investors scooped up Bt5 billion worth within a week, he said.

Adisorn is of the opinion that when deposit protection is slashed, many will be more encouraged to move their money from bank deposits to real estate investment trusts (REITs). In August, maximum deposit protection per account per bank will be cut from Bt25 million to Bt1 million.

“This will further encourage wealthy investors to channel money somewhere else,” he said.

Noting that monitoring is a normal operation of the central bank, Chansak Fuangfu, Bangkok Bank director and senior executive vice president, said a bubble in the property sector was unlikely given low domestic demand amid economic sluggishness.