Household debt has risen to alarming levels over past decade, BOT study finds

[webfact]

Household debt has risen to alarming levels over past decade, BOT study finds 

By The Nation

 

 

Thai household debt rose to 80.1 per cent of gross domestic product in the first quarter of this year, up from 50.4 per cent in 2009, according to a study.

 

The high debt has adversely impacted economic growth while the Covid-19 outbreak has made it more challenging to solve the household debt problem and they have the potential to delay economic recovery, said the study by researchers at Bank of Thailand (BOT)’s Puey Ungphakorn Institute for Economic Research.

 

Over the past 10 years, more people are bearing a debt burden and the size of the debt has increased from Bt70,000 to Bt128,000 each (median value), according to the study released at BOT Symposium 2020 on Monday.

 

The share of bad debt/non-performing loans has decreased from 22 per cent to 16 per cent, which is considered still high. The median value of bad debt was Bt 65,000, up from Bt35,000 previously.

 

The study also found it astonishing that debtors who had started borrowing money at a young age continued to bear the burden even after retirement.

 

About 60 per cent of people aged 29 to 30 years old have debt. Among them, 25 per cent were in the bad-debt category. Pensioners still have debt, with median value of Bt70,000 to Bt80,000 per debtor.

 

Researchers believe the first-car scheme launched in 2011 was a major factor in the rising debt of urban residents. Farm subsidies, such as debt moratorium to support farmers also resulted in rising debt among people upcountry.

 

This suggested that a moratorium could not solve the debt issue.

 

The Covid-19 outbreak has worsened the situation and many are unable to service their debt.

 

Of the large number of people who had applied for financial aid under the central bank’s scheme between April and June, 71 per cent asked for temporary suspension of debt payment, 26 per cent demanded reduction of debt instalments and 3 per cent applied for debt restructuring as they were no longer able to repay the debt.

 

Those who applied for debt relief were concentrated in the lower-northeastern region covering Nakhon Ratchasima, Buri Ram, Surin, Si Sa Ket and Ubon Ratchathani provinces. About 40 to 60 per cent of applicants were personal loan borrowers followed by mortgages, while most of those in Bangkok and vicinity provinces, the South and upper North applied for restructuring of their bad debts or non-performing loans (NPLs).

 

Non-bank lenders represent a large share of debtors asking for debt relief. Most of the debts are hire-purchase loans. Should the coronavirus linger on, non-bank lenders would have high risk stemming from debt default, the researchers said. Each has debt of about Bt500,000.

 

In July when some financial aid expired, the study found that 2.1 million debtors exited the scheme, and they represented about 36.7 per cent of total debtors who received debt relief.

 

The study called for urgent actions to solve the rising household debt.

 

One proposal is to amend the bankruptcy law that will allow debtors to file for court protection and then they can start their lives anew after three years of the debt payment process, in the same manner as corporates currently applying for bankruptcy protection.

 

Reopening the country to foreign tourists would also boost economic activities, which could help many debtors as rising income would increase their debt payment capacity, the study said. But it will come with the risk of a new wave of virus infections, so the reopening for tourism must be managed carefully, the study said.

 

Concerned parties may need to apply different solutions for debtors in different regions, the study suggested.

 

The study is based on information collected from the National Credit Bureau Co, whose data base covers 23.1 million retail borrowers with combined debt of Bt 11.9 trillion, representing 88.3 per cent of the total household debt, and data from Bank for Agriculture and Agricultural Cooperatives.

 

Source: https://www.nationthailand.com/business/30395352

 

-- © Copyright The Nation Thailand 2020-09-30

 

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[ThailandRyan]

Just ask the BOT and the banks, they know its bad but will always say it is under control.  Makes one wonder if the Baht being a high flyer is not just a way to keep the whole house of cards afloat.  Looking like a possible looming financial crisis is starting to emerge.

[edwinchester]

It always strikes me as how remarkably easy it is to get some form of loan here. Teachers seems to be particularly indebted yet money continues to be thrown at them. A friend of my wife is a teacher's assistant earning just over 9k bht per month yet they got a car loan that costs nearly 8k bht a month. Their mum is scrabbling around for money to help with the loan every single month.

[RotBenz8888]

[Forza2002]

The Govt. conveniently turns a blind eye to the debt problem, making it even worse by encouraging people to spend to support domestic tourism with all the hotel/flight promotions...

[RichardColeman]

4 hours ago, webfact said:

Thai household debt rose to 80.1 per cent of gross domestic product in the first quarter of this year, up from 50.4 per cent in 2009, according to a study.

This is extremely alarming , in so far as this does not include any COVID debt , and has been accrued during years of potential 'stability'.

 

Household debt now must be well over 100% of GDP if 80% prior to covid

[DrTuner]

Well d'oh. Credit cards & co bacame widely available in the last decade.

[DrTuner]

Quote

One proposal is to amend the bankruptcy law that will allow debtors to file for court protection and then they can start their lives anew after three years of the debt payment process, in the same manner as corporates currently applying for bankruptcy protection.

 

Reopening the country to foreign tourists would also boost economic activities, which could help many debtors as rising income would increase their debt payment capacity, the study said. But it will come with the risk of a new wave of virus infections, so the reopening for tourism must be managed carefully, the study said.

Read this as: Let the peasants default and the Chinese grab it all.

 

Belt & road in action.

[86Tiger]

Actually, this is not a surprise.  It is a huge problem not only in Thailand but many countries.

 

My bride has absolutely no concept of value or worth of money nor the discipline required to save/accumulate.  Her only thought is what I have right now is how much I can spend right now.  

[lujanit]

The above figures do not account for the amount that is unknown and cannot be known.  I'm talking about the money owed to loan sharks.  When people cannot get loans from a bank or similar they turn to loan sharks.  The people who use loan sharks hardly ever get out of debt.

[Bender Rodriguez]

live by your means, not in a thai dictionary

[RichardColeman]

26 minutes ago, 86Tiger said:

My bride has absolutely no concept of value or worth of money nor the discipline required to save/accumulate.  Her only thought is what I have right now is how much I can spend right now.  

I have had 2 Thai wives.

The current wife, after we married at the office, spoke to me about planning and saving for our future and not wasting money on anything , or expensive gold jewelry and anything for show. Even now 5 years later she uses all the shop stamps and phone offers to save money. I'd say we are slightly better off financially now than when we married. Her motto is always save and plan for a better future.

My first Thai wife had no concept of saving. Day we married she said give me 2000 baht to pay her overdue phone bill as my money was hers now and it needed paying - i should have listened to what my brain was telling me, for when  I brought her to the UK months later, I promptly divorced her for taking out £40,000 in false business loans ! 

[Justgrazing]

7 hours ago, webfact said:

Researchers believe the first-car scheme launched in 2011 was a major factor in the rising debt of urban residents.

Thai version " Can't pay we'll take it away " on the box soon with lots of boing and twang noises .. 

There's a market opening here for exorcisms to prevent them being repossessed unless debtor can convince the repo man to leave them a-loan ..

 

 

[Redline]

Same old issues~no accountability in any aspect of life in Thailand

[Cake Monster]

6 hours ago, ThailandRyan said:

Just ask the BOT and the banks, they know its bad but will always say it is under control.  Makes one wonder if the Baht being a high flyer is not just a way to keep the whole house of cards afloat.  Looking like a possible looming financial crisis is starting to emerge.

I also believe there is a " normalisation " about to happen here in Thailand.

The Baht does seem artificially high, and could be used to underpin the weakening Economy.

One reason the Baht cannot be devalued is the ever mounting problem of Private Debt. This Debt is OK if the borrowers have the capacity to repay such as in the Developed World, where Loans are only issued against assets that have high value EG Mortgages on correctly valued properties Etc. 

However, I personally think ( rightly or wrongly ) that an awfully large amount of the Private Debt has been issue against poorly rated Assets , such as over valued Land, Poorly priced property, Car Loans, and Private Business with false Accounts, and dare I say it, Assets that do not even exist  Etc.

If this really is the case, then a Financial Crisis could well be on the cards

 

[hotchilli]

6 hours ago, edwinchester said:

It always strikes me as how remarkably easy it is to get some form of loan here. Teachers seems to be particularly indebted yet money continues to be thrown at them. A friend of my wife is a teacher's assistant earning just over 9k bht per month yet they got a car loan that costs nearly 8k bht a month. Their mum is scrabbling around for money to help with the loan every single month.

I have two similar stories both concerning newly qualified teachers, one is a nearby neighbour while the other the daughter of a friend. Both end of last year passed the final exams to get their teachers licence.

Within a month or two both bought brand new cars, one a modest Vios the other a Ford Ranger/Raptor.

It's almost like an "I've arrived status symbol" into the civil service.

 

[worgeordie]

The Government does not set a good example either,buying Tanks,Planes,Strykers,Submarines,

and a whole host of other cr&p,

It seems most of the World is in debt ,with the interest rates that are been given,they don't see

the incentive to save.people want it and they want it now ! never mind they cannot afford it.

 

regards worgeordie

[Andycoops]

7 hours ago, edwinchester said:

It always strikes me as how remarkably easy it is to get some form of loan here. Teachers seems to be particularly indebted yet money continues to be thrown at them. A friend of my wife is a teacher's assistant earning just over 9k bht per month yet they got a car loan that costs nearly 8k bht a month. Their mum is scrabbling around for money to help with the loan every single month.

Because as a civil or public servant in Thailand who never gets the sack, or very rarely, they have a quaranteed income for life.

Virtually all the big new 3/4 bedroom houses in my area are all owned by teachers or doctors and they have cars to match well below western loan standards of income.

It's Thai finance ...

[onebir]

4 hours ago, lujanit said:

money owed to loan sharks

This does seem to be a big problem:

https://www.thaienquirer.com/9013/opinion-loan-sharks-smell-blood/

[Cali farong]

Quote

 

Of course there is a debt problem.  Every mall has new cars or motorbikes or new house in PROPERTY that they make too easy to buy.

same old story  I want I want I want 

[pagan1]

Perhaps those raising concerns about the level of Thai Household debt should look at the comparable debt levels in their home country before making comment. The problem is not Thailand but the fact that governments and banks in all countries are happy to kick the debt can down the road ...................

[Albert Zweistein]

2 hours ago, pagan1 said:

Perhaps those raising concerns about the level of Thai Household debt should look at the comparable debt levels in their home country before making comment. The problem is not Thailand but the fact that governments and banks in all countries are happy to kick the debt can down the road ...................

You certainly have no clue at all.

[Foghorn]

I knew a Thai woman who was a guarantee for her friend and she for her other friend and she for hers , 6 off them in a circle, you wouldn’t believe this possible but it is here

[lujanit]

My dear departed Mum drilled into us kids the mantra 'do you need it or do you want it'.  In SE Asia where face is everything 'I want it because it gives me face is paramount'.

 

How can a finance company lend money to someone who earns 9k a month for a car on which the repayments are 8k a month?  Would never happen in a modern western country.

[Henryford]

Oh the irony, banks complaining there is too much debt.

[Henryford]

15 hours ago, hotchilli said:

I have two similar stories both concerning newly qualified teachers, one is a nearby neighbour while the other the daughter of a friend. Both end of last year passed the final exams to get their teachers licence.

Within a month or two both bought brand new cars, one a modest Vios the other a Ford Ranger/Raptor.

It's almost like an "I've arrived status symbol" into the civil service.

 

Even a "modest" Vios must have cost 2 years of her teacher's salary. Like someone in the West paying 50,000 GBP for a car.

[HashBrownHarry]

44 minutes ago, Henryford said:

Even a "modest" Vios must have cost 2 years of her teacher's salary. Like someone in the West paying 50,000 GBP for a car.

In the UK almost every household has 2 brand new cars in the driveway, looking at the house this would appear to be totally beyond their means.....

 

It's not just here!

[Happyman567]

I think Thais can get loans here very easy. Wife had  a

couple working for her They bought this bloody expensive Pick-Up and there is no way they could afford the loan but they got it. Anyway they did  a runner and the wife was getting people around looking for them wanting the money

[heina]

Bank of Thailand gives money to banks, banks give money to households and enterprises.

The reason of alarming level of debt is Bank of Thailand (as well as others central banks)

[Stygge]

But you are all missing the point why the thais are loaning money to buy a

brand new car. They don´t need a budget for driving it. It´s purpose is to embellish the driveway to the house showing neighbours their prosperity. And the neighbours need to do the same, of course.