Record high household debt in Thailand
The Thai population is borrowing more and more and therefore has higher debts. Household debt has reached a record high of 131.479 baht per household on average, the highest amount in the past eight years, the University of the Thai Chamber of Commerce (UTCC) announced. Thai people mainly use the borrowed money to buy durable goods such as cars and houses.
Thanavath Phonvichai, vice president of research at the UTCC, said household debt rose 10,43 percent from last year. The main reasons for this are the economic problems, higher prices and rising interest rates. Another important cause was that farmers have less income because prices for the three most important agricultural products rubber, palm oil and rice fell simultaneously for the first time in 50 years.
It is worrying that average repayments are falling sharply: from 8.114 baht per month last year to 5.980 baht this year. The number of debtors with repayment problems, on the other hand, fell from 83,5 to 78,6 percent. The number of working people who were able to save rose from 39,4 to 62,6 percent.
The UTCC data is based on a survey of 1.258 workers earning less than 15.000 baht per month. 97 percent say they have debts, 78,6 percent say they have difficulty repaying the debts.
Source: Bangkok Post
The mentioned percentage of 97% with debts is quite similar to the percentage that a Thai working in the financial sector mentioned to me some time ago: 95%. An incredibly high but apparently realistic figure.
The survey only covers people with an income of less than 15.000 Baht per month.
I would like to see the subdivision into (mortgage) loans for real estate, for means of transport and for other debts, three groups. I tend not to view a home loan as a household debt. Now everything is swept in a heap.
If a debt of 131.000 baht for someone with an income of 15 k per month really exists and that is NOT for real estate or other solid collateral, then you are talking about over-crediting and then as a bank you should also sit on the blisters if one cannot pay off.
Finally, I wonder whether a survey of 1.258 people in a population of 68 million is representative. Maybe an expert reader can answer that?
In a country with an extremely skewed income distribution, it is very dangerous to rely solely on averages. It could be better indicated where the 50% limit is or – in statistical terms – the median.
People with higher incomes also tend to have higher debts. That may sound strange because as expats we see a lot of average and below-average Thais around us with little income (well below the average indicated by Tino) and relatively large debts. However, the debts largely consist of loans taken out for the purchase of cars, a house and/or land. In the Netherlands we are also not surprised by a person who earns 40.000 euros per year and has a middle class car and also a mortgage of 300.000 euros.
Let me make 3 more comments on this post:
1. I am pretty sure that the debts the Thais incur to family, friends and loan-sharks (usually incurred for smaller purchases, school fees and unfortunately also for gambling) are not factored into the figures. After all, the Thais won't tell you that. That may not be large debts, but I do have the impression that many Thais have such debts. And many little ones also make 1 big one;
2. It is alarming that the number of people with payment problems is so high. This is partly artificial. Some Thais with a good network in the banking world make little or no repayments and that is accepted by the bank: favoritism. The risk is for the bank, but the value of the car or house is offset against it. But the bank is not likely to intervene if an army general fails to pay his monthly installment.
3. As far as I can judge, banks have taken a harder line in recent years towards people who, so to speak, make a mess of things and thus lose their reliability. However, it would be better to tighten the financing conditions. That is – I think – the next step.
The arithmetic mean is just one of the measures used to characterize incomes and debts.
It mainly applies to fairly even distributions.
The median and mode are more appropriate for skewed distributions, as they barely account for the influence of those with extremely large debts and debt-free individuals.
Thailand's income and wealth distribution are now extremely skewed, in that the rich and super-rich push the arithmetic mean way up, itt mode (which amount occurs most often) and median (the amount that separates the top half from the bottom half).
Anyone who looks at incomes and debts from a social point of view will therefore not primarily use the arithmetic average.
To illustrate: even if we do not include children, typical Thai families with two adults would consider themselves happy with an income of 2 x 250000 baht, and unhappy with the corresponding debt...
But Tino, averaging numbers is like generalizing about a population—something you resist so often.
You are staring blindly at average numbers.
That 32% savings, for example, is for the most part held by a small number of very wealthy people.
A very large number of Thai people will have no wealth, or even negative wealth.
Those numbers in the links you provide (I'm not going to dig into them) probably don't contradict each other, you just need to know what they represent.
A problem that is very difficult to estimate because the publicly available information is not very reliable (read scientifically based on “state of the art”), is fragmentary and inconsistent.
To conclude that it is negative or positive, worrying or reassuring, risky or safe is anything but obvious.
If there is sufficient equity to match the private debt (and if that capital is sufficiently spread among debtors and therefore not only concentrated among creditors), then there is sufficient solvency in the system and no imbalance. Then the general picture is not negative.
At the very least, there are serious indicators that Thailand's "distribution" is not quite right. So not so positive after all?
In addition, for the global assessment of the debt position of the country, that private debt must be seen together with that of the governments of that country. To my knowledge, “deficit spending” is a constant policy in all Thai governments, current and past.
With this persistently constant government policy (including large expenditures for projects that do not create economic added value, e.g. Chinese submarines or subsidizing loss-making economic activity, mainly in the agricultural sector), the Thai government is in my opinion well on the way to creating problems, instead of to solve them. Not so positive then?
It does not seem to me that you should count the loss-making agricultural sector under loss-making economic activity.
If the Thai government does not support the agricultural sector, what will happen?
Then the people starve on the spot, or they move in large numbers to the big cities, looking for work, which is not there.
I wonder what the consequences of that are.
Probably huge ghettos, with huge crime.
And probably police and army assassination squads to keep the ghettos under control.
I don't think the country will benefit from it.
The picture of the future outlined is plausible, but alternatives are conceivable and feasible.
However, the problem is that policy in Thailand (by successive governments) barely anticipates the rapid evolution in the agricultural sector (automation, global competition). There is hardly any structural reconversion policy in rural areas to help people who work in the agricultural sector find another job in the industrial or service sector. No land reform, because of Thai inheritance law the areas are increasingly fragmented, land reform is largely done through default of debts with land as collateral.
Not pursuing a policy is also a policy choice.
Giving subsidies by, for example, buying rice at prices that are not in line with the market (previous governments) or for set-aside (current government) amounts to spending taxpayers' money for a “death house construction”.
An alternative is to spend tax money as a “birth premium” for new economic initiatives that offer prospects for growth and added value.
Which policy is best for the Thai people? Focused on reconversion or continue to follow well-trodden paths? By choosing the latter, the pernicious situation that “ruud” sketches comes into view. The road to that is slightly stretched in time with tax money. The money spent on this is of course no longer available for reconversion. Neither does the money for the Chinese submarines…
In a richer country (often richer, because they can run up larger debts) there is often social assistance.
Something from which the subsidy on agriculture is not so different, except that it also keeps people busy.
Furthermore, Thailand, like any other country, faces the problem that fewer and fewer workers are needed due to automation.
The fact that automation, according to the government, also creates new new high-quality jobs, is a gross deception.
It may create a few high-quality jobs, but for the 100 workers who become unemployed, there may be 10 new jobs.
Probably not even.
The current economic system has no solution for this growing unemployment, so neither does Thailand.
The whole world will have to think about the rules of the game of income and prosperity, in order to prevent 99% of the world's population from being declared redundant.