Thailand: Households struggle with record debt as income dwindles

  • Rice farmer Jamras Kongchai is struggling to pay off THB500,000 in debt as money from the sale of her crops is not enough to make payments.
  • Adding to the strain, the coronavirus outbreak has shut a small construction firm where she worked for USD10 a day for much needed extra income.
  • Ms Jamras has only repaid some of the interest since 2013, and hasn’t put a dent in the principle. In 2021, she has to pay THB40,000 in interest, but she has no money. “I hope to get some help.”
  • Such protests have put further pressure on the government, which is already grappling with mounting pro-democracy demonstrations and struggling to revive the pandemic-hit economy.
  • Thai households are among the biggest borrowers in Asia, racking up a debt mountain of THB14tr, or 89.3% of gross domestic product (GDP) by the end of Dec 20, a sharp rise from 78.1% in 2017. And they are finding it increasingly difficult to keep up with payments.
  • The level of household debt is the highest since the central bank began keeping records in 2003.
  • High debt also poses a risk to financial stability and restrains consumer spending, impeding a recovery from the coronavirus crisis. The economy suffered its deepest slump in over two decades in 2020 as exports shrank and the vital tourism sector reeled from the absence of foreign visitors.
  • While the latest flare-up in infections has been largely contained, it has reinforced fears that an economic rebound will be slow and patchy, prolonging the pain.
  • “Even before Covid, our debt-to-GDP was already the highest among emerging markets,” said Yunyong Thaicharoen, chief economist at Siam Commercial bank.
  • “It’s above a level that has quite an impact on GDP and household spending,” he said, adding the debt ratio could peak at 90-91% of GDP in 1Q21.
  • The growing debt burden is likely to curb private consumption, which accounts for half of Thailand’s USD502bn GDP, and will hurt lenders’ earnings if more loans turn sour.
  • To be sure, the pandemic slowed down loan demand in 2020, but the slumping economy also made it more difficult for people to repay their loans.
  • Consumer loans rose 4.6% in 2020, slowing from a 7.5% rise in 2019 as the outbreak cut household purchasing power, according to the central bank.
  • But loans with a significant increase in credit risk jumped, with autos loans hitting 9.5% of lending, the highest in at least three years.

External Link :