Explosive increase in household debt in Thailand: economic storm coming?
Bank of Thailand (BOT) Assistant Governor Tharit Punpiamrat has expressed concern over the rising debt burden of Thai households.
At an annual seminar organized by the Board of Trade of Thailand, Tharit pointed out that household debt has been exacerbated by the global pandemic and recent floods, pushing it to 90,5%. Particularly worrying is the ratio of loans taken out for consumption purposes.
Tharit called on financial institutions to stop aggressive credit advertising and focus instead on debt restructuring. He also emphasized the importance of financial education in schools and universities.
Danucha Pichayanan, the secretary-general of the Office of the National Council for Economic and Social Development (NESDC), noted that Thailand's disappointing GDP growth of 1,8% in the second quarter requires urgent attention. This disappointing growth is mainly due to a decline in exports, which has had an impact on the capacity utilization rate in the private sector; currently only 60% of the capacity is being used.
Danucha also suggested diverting some international flights to regional airports such as Phuket and Chiang Mai to reduce pressure on Bangkok's Suvarnabhumi Airport. He further advocated the use of the Thai baht in cross-border trade and investments.
According to the Secretary General, the NESDC encourages the private sector to seize opportunities that arise when manufacturers move their production base from China. However, Thailand needs to improve the quality of its workforce and adjust regulations to attract investment, especially in sectors such as electric vehicles, EV components and the semiconductor industry.
Source: NNT- National News Bureau of Thailand
About this blogger
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Known as Khun Peter (62), lives alternately in Apeldoorn and Pattaya. In a relationship with Kanchana for 14 years. Not yet retired, have my own company, something with insurance. Crazy about animals, especially dogs and music.
Enough hobbies, but unfortunately little time: writing for Thailandblog, fitness, health and nutrition, shooting sports, chatting with friends and some other oddities.
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It is a huge problem, a lot of appearances, I also want what the neighbors have and preferably even bigger and nicer, take out a loan to pay off another loan and if that no longer works, go to a “black” mortgage company, well then you are digging your own financial grave. A lot of things are self-evidently based on the assumption that you buy on installments, two years ago I bought a brand new car in BKK, the saleswoman arrived as usual with bank papers for the loan and to take out the insurance, this saleswoman couldn't believe her ears. that the total purchase amount was paid in cash, i.e. by private bank transfer, without a loan or credit from a bank. she had never experienced that before. In other words, half of Thailand depends on borrowed money and many cars are returned to the dealer from people who can no longer pay the loan and are left with debts. with all the misery that entails
I read a few weeks ago that 25.000 to 30.000 cars are repossessed per month due to non-payment of the car loan.
And the price of a used car is still sky high here, I don't understand it.
Moderator: Keep discussion on Thailand.
They could of course start by reducing the interest rates on loans, credit cards etc from 15-20% to a friendlier percentage.
But they do not have an AFM here and the ombudsman always refers to the financier/bank/institution
Cousin has a house built, mortgage 2.0 million, after recording the first phase of construction, say 360 K, they can immediately pay interest on the full 2.0 million.
With those kinds of instruments you don't help anyone other than the bank
The interest on mortgage was reasonable, MRI +2%
I forgot to mention that the mortgage is approximately 60% of their income, with a guarantee from mother who sells cookies
I don't expect much good from that in the near future
With such benefits you plunge people into a financial abyss from which they will never emerge
Debt in itself is not the problem. The debt burden of the Dutch population is also high, but this is offset by their own house, car and in many cases a regular salary (with possible social benefits).
The problem in Thailand lies in the limited options for repaying those debts. And that's for two reasons:
– the banks lend money too easily (perhaps out of fear of losing market share to loan sharks);
– there is often no regular income, nor social services so that the guarantees
loans consist of land and guarantees from others (who often also have no regular income).
Just looking at the banks (and tightening conditions for loans) will not help because the control of loan sharks leaves much to be desired.
The ease with which credit cards are issued.
I know Thai people with a salary of around THB 30.000/month and who transfer that money every month, but have 4 different accounts at 4 different banks in order to demonstrate to each bank that they have a fixed monthly income and therefore have 4 credit cards with corresponding debt.
It would be quite helpful if the Thai government cracked down on loan sharks.
Who asks for money? The one who lends money should scratch his head and ask himself if it is necessary. Many other countries comparable to Thailand do not have such a big problem and there also rice has to be put on the plate or grandma has to be taken to the hospital (in Thailand for free by the way); it is a question of mentality and not even status or poverty what all you have in most Asian countries.
Banks in Thailand are even more cunning than in the Netherlands, if you have an account with a bank in Bangkok and you withdraw from a branch of the same bank in Udon Thani, you will pay extra costs, because you withdraw in a different province than where the bank branch is where you have your account, I can already see it in my mind, I have an account at a branch of bank my own province withdraws money, well you can't imagine that, but it is true in Thailand, the interest rates on loans are exorbitantly high, that would make a big difference if it were a little less
Most responses indicate that the interest rate is too high. When you take out you know how much the interest is, so don't complain about that. Loan sharks charge a lot, but they do fulfill a function, namely providing money to people who cannot get money in any other way. You have those guys in all shapes and sizes. They have to be tough, because giving a loan without collateral... If someone doesn't pay back in the village and he or she gets away with it, no one will pay back.
I see the problem more that people want too much and borrow for the sunniest income scenario. If something goes wrong, they have problems.
Education is a very good path and I think it is very necessary, but that will take a long time, because changing a mentality is not easy. Here in my wife's village I have the feeling that people deal with money completely differently than the average older Dutch person. Most spend the money in their pocket that same day. I'm amazed that the system works at all, but somehow it does, because people don't die from a lack of food.
Have you ever wondered whether the officially calculated interest rate by the banks is so high because that of loan sharks is even higher? They make the ceiling. Staying below that makes all loans “CHEAPER”.
It works the same with hotel room prices. If there is a 5-star hotel nearby, all 3- and 4-star hotels can raise their prices and still appear cheaper to the customer.
My brother-in-law has a great job at a large company. Makes a good living but can't manage his money at all.
Apparently they can also borrow money from their company. I don't know the details, but I do know that he already has a large debt outstanding there. He doesn't pay anything off, with the result that only half of his end-of-year bonus is paid out.
He also owes several million to the banks. Not a month goes by without a registered letter from a lawyer. Those letters simply disappear into the garbage bin. They no longer have any properties, everything has already been sold. The only thing they have is a car, but they cannot claim this because it is also linked to a loan.
They have a son who wants to start university studies next year. No one knows how they will pay for this. I fear that my son will be allowed to go to work, the money is not there. I have noticed that he has been very sweet to myself and my wife in recent months... I can already feel the mood hanging over him. But apart from some pocket money, he won't get anything from us, rest assured.
So you see, a Thai cannot manage money. If they have 100THB today, they will spend 200THB. If they buy a car or a house, the largest is just good enough. Their status is more important than paying off debts. Fortunately, my wife has learned the concept of saving. She is the only one in the family with quite a bit of money in the bank. But no one knows this except ourselves 😉