Former Prime Minister Thaksin Shinawatra recently unveiled a government initiative to buy up household debt, following the rise in Thai household debt to 2024% of gross domestic product (GDP) in the second quarter of 89,6.
The proposal would see the government take over the outstanding debts of individuals with banks. These debtors would then be given the opportunity to pay off their debt in installments. The government would refrain from immediately recovering these debts, and would also help remove those affected from the National Credit Bureau (NCB) register. This would give them the chance to make a fresh start debt-free. According to Thaksin, the plan would be financed through private investment, without using public funds.
Government is investigating possibilities
Finance Minister Pichai Chunhavajira said Tuesday that the ministry will further examine Thaksin's proposal and will also take into account the views of various stakeholders. During a meeting with the Thai Bankers Association, he stressed that further discussions are needed to further develop the proposal.
Implementation of debt plan proves complex
Therdsak Thaveeteeratham, executive vice president of Asia Plus Securities, calls the plan “promising” but points to implementation challenges.
“The idea of buying up household debt is interesting, especially since Thailand’s high debt burden is a drag on economic growth. But without clarity on the sources of financing, it is difficult to judge whether the plan is actually feasible,” he says.
According to Therdsak, successful implementation of the plan could revive lending within the banking system. He also expects it to boost domestic consumption and benefit the real estate sector, where banks are currently reluctant to lend.
Indispensable role for private investors
Suwat Wattanapornprom, head of research at Krungsri Securities (KSS), says the role of the private sector in particular needs clarification.
“The government has not yet clarified what types of debts will be covered by the plan. We do not expect that all household debt – which amounts to about 90% of Thailand’s GDP – can be taken over by the government,” Suwat said.
The key question remains, according to him, whether private parties are prepared to invest and how the fund will be managed. Nevertheless, KSS sees that the announcement of the proposal has already positively influenced market sentiment within the banking and leasing market.
Combination of emergency measures and structural solutions required
According to Yunyong Thaicharoen, chief economist at the SCB Economic Intelligence Center, the debt proposal should be seen as part of a broader strategy. He emphasizes that the solution to the debt problem must come primarily from economic growth, rising incomes and improved access to credit.
“The purchase program can provide temporary relief to vulnerable households, but it must be a targeted measure to prevent irresponsible borrowing and spending behavior,” Yunyong said.
SCB EIC also expects the Bank of Thailand to cut its policy rate twice this year, in a bid to stimulate economic activity and ease interest burdens for households and businesses.
Weak growth outlook and international risks
SCB EIC forecasts economic growth of 2,4% for 2025, slightly lower than last year’s 2,5%. While Thailand has reached pre-pandemic levels, it still lags behind other countries in the region. Average growth over the past four years was just 2,1%, down from 3% in pre-pandemic years.
Yunyong also warns of external risks, such as possible protectionist measures by the United States, which could slow Thai exports.
Sectoral concerns: hospitality industry requires a tailor-made approach
In addition to these macroeconomic considerations, there are also sectoral concerns, for example from the hospitality industry. Sorathep Rojpotjanaruch, chairman of the Restaurant Business Club, believes that the plan to only help NPL borrowers is insufficient.
He advocates that the government give specialized financial institutions more room to expand existing credit limits for entrepreneurs. He also proposes to remove negative credit registrations of companies with Covid-related payment arrears.
In addition, he is asking for a temporary debt moratorium, whereby interest payments are temporarily suspended. However, Sorathep emphasizes that such measures only offer partial relief.
“The core problems for the hospitality industry remain the high prices of raw materials and the reduced purchasing power of the consumer,” says Sorathep. He advocates tax benefits for consumers who use the hospitality industry, for example via a personal deduction.
Government must proceed with caution
Visit Limlurcha, vice-chairman of the Thai Chamber of Commerce, underlines the urgency of the household debt problem, but warns that measures must be based on solid principles to avoid harmful side effects.
He points out that small and medium-sized enterprises (SMEs) already face high interest charges and limited access to new credit. Banks often reject applications from companies with high debts.
Many questions remain unanswered
Kriengkrai Thiennukul, chairman of the Federation of Thai Industries, said more clarity on the plan was needed before he would comment on its content.
“The proposal is reminiscent of the government’s approach during the 1997 financial crisis,” he said. Kriengkrai sees it as positive that the government wants to tackle the debt problem, which has been holding back the economy for years.
In the meantime, the market is waiting. As long as no concrete details are forthcoming about financing and implementation, uncertainty will continue to prevail.
Final remarks
While Thaksin’s proposal shows an intention to relieve households and stimulate the banking system, its success will depend on the private sector’s willingness and government execution. The coming months will show whether this debt plan will actually solve one of the Thai economy’s most persistent problems.
Source: Bangkok Post – Link to original article: https://www.bangkokpost.com/business/general/2982878/analysts-want-details-on-debt-plan
You can always throw out a trial balloon, but I'm glad the experts are reserved about it.
Solutions can be found for the official debts but it will cost tax money anyway because either the creditor sells the package at a loss and therefore less profit tax or the creditor sells at full value and then the government goes under because market parties will then take over the package at even worse conditions. They do not have to do anything until the government lowers the price and with the experience of coincidentally that same clan member regarding rice purchases this is an unsavory idea.
There is also another aspect at play.
The informal debt plan apparently does not seem to work so there may be relief on the other debts but the fact remains that the financial approach of many debt makers is to keep seeking the limits. So less to the government that sets up the program and more to the black money circuit.
And oh, if it costs money then the VAT will simply go back to 10% because that is just an annual gesture to the population. In that case the population pays for the failure of financial education that should start with putting money where your mouth is.
The only ones who can and want to refinance are the banks and financial institutions, where the debts are currently outstanding, in other words nothing changes or there is a link between them that also wants to earn and charges extra costs for the risk of default. And because money is released at the current lending banks, more is lent and the mountain of debt increases. How do they come up with it and the fact that a bank even responds to it is just as absurd. Compare it to a farmer who is thought not to have to grow rice because it is too hard work, ok the Thai solution is that a rice farmer is hired to take over the work of the other farmer. Nominate Mr. T. for a Nobel Prize in Economics.
Plans are nice with many names but they are for the stage.
Biggest debts are caused by Thai people not paying on time which has to do with
poor education, because of this people borrow too much and do not look ahead {Buddhist Culture}
As a result, the majority of the Thai population is blacklisted due to poor payment of, for example,
75% payment completed on car but due to circumstances can no longer meet the payment
car etc. is seized, reclaimed and sold on to the trade for a high price with the following:
As a result, Thais take out loans for new cars needed for work etc. with loansharks
or chanot of the land is sold to a person to get money.
A plan that has nothing of a plan at all. Funny.
Buying up the 90% of household debt? Who pays for that?
And then what?
Without education of the population to learn how to handle money and strict lending restrictions, this will be like mopping with all the taps open.
Otherwise, most of those 90% of households will say... "Thank you Government" and happily start building up debt again with a clean slate.