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Home » News from Thailand » Thai household debts are rising to a record high
Thai household debts are rising to a record high
(flydragon / Shutterstock.com)
Due to the Covid-19 crisis, household debts have risen by more than 42 percent to the highest level in 12 years. This is according to the latest poll by the University of the Thai Chamber of Commerce, which surveyed 1.229 respondents in the period November 18 to 27.
The average debt was 483.950 baht compared to 340.053 baht in the same period a year earlier. Then it was 7,4 percent higher than in the same month in 2018. In 2009, the average debt was 147.542 baht.
Debt has increased due to the poor domestic economic situation, partly due to the pandemic, the higher cost of living, unemployment and lower income. The debts are incurred for general expenses, autos, mortgages, credit card fees and repayments of previous debts.
More than 77 percent is borrowed from financial institutions, 2,6 percent consists of loans from loan sharks (money sharks) and 20 percent from a combination of the two. Debt is expected to rise to 2021 to 89 percent of GDP (gross domestic product) in the first quarter of 90,9, compared to 88 percent at the end of last year.
Source: Bangkok Post
Because a wrong definition is used of the concept of household debt, no change or solution will ever occur. As mentioned in the articles, debts are incurred or increased for the purchase of luxury status-enhancing items: smartphones, latest editions of laptops, tablets, scooters, cars, etc.etc., in addition to taking on high mortgages.
In my opinion, a household debt is a deficit for maintenance and for running a decent household. For example, purchasing a washing machine, refrigerator, gas stove, if they have broken down, and doing daily shopping. If you have no or too little income and you borrow money to provide for your livelihood and / or household, especially if you also have a family, then I can speak of household debt.
But taking out loans for mortgages, car financing, credit card spending, etc., does not belong in the denominator of taking on household debt. These types of loans indicate carelessness and overconfidence.
There are 3 measures to be taken: First, the government must raise the minimum wage to such an amount that an ordinary household can feed.
Secondly, there should be legislation that forces financial institutions to apply stricter and restrictive conditions when applying for financing.
Thirdly: the phenomenon of loanshark must be regarded and combated as a criminal act.
If you say that the definition is not correct and therefore the figures are incorrect, then you cannot come up with the proposed measures, can you?
Well, there is something to be said about the 3 measures. Firstly, the Thai economy consists of 40 to 60% informal economy and there are also 3 million small entrepreneurs. About 70% of all employees work in the informal sector, which means that a minimum wage only applies to a small group of salary recipients, and many with a salary already have more or much more than the minimum wage. Secondly, there are already strict and restrictive measures for financial institutions and these really do not lend if it is expected that there will be poor or no repayment, because that affects business operations and profitability. And third, the loansharks / illegal lending is already prohibited.
see the link:
https://www.bot.or.th/Thai/MonetaryPolicy/ArticleAndResearch/FAQ/FAQ_156.pdf
en
https://www.oecd-ilibrary.org/sites/2c7b8253-en/index.html?itemId=/content/component/2c7b8253-en
My reaction was to what Jannus wrote about the 3 measures.