As debt levels rise, more Thais struggle to keep up

[webfact]

As debt levels rise, more Thais struggle to keep up

By Orathai Sriring and Satawasin Staporncharnchai

 

Promotion staff sell their new condo project in a shopping center in Bangkok, Thailand August 25, 2018. Picture taken August 25, 2018. REUTERS/Soe Zeya Tun

 

BANGKOK (Reuters) - Pimpa Panlao, 31, is struggling to pay off an 80,000 baht ($2,440) bank loan and spends a third of her income from selling women's accessories at a Bangkok market to repay the loan.

 

"Business is bad and it's very tough when you have debt," Pimpa told Reuters, who used part of the loan to finance her business. She is not alone.

 

With a debt mountain of 12.17 trillion baht ($372 billion) at the end of March, the equivalent of 77.6 percent of gross domestic product, Thai households are among the biggest borrowers in Asia and they are finding it increasingly difficult to keep up with payments.

 

In addition, their debt pain could increase because the Thai central bank has signalled it is likely to follow other central banks around the world and raise interest rates from near record lows.

 

Non-performing mortgages, defined as those that have not been serviced in more than three months, were 3.39 percent of total home loans at the end of the second quarter, the highest level since the end of the global financial crisis in 2009.

 

Auto loans that have been delinquent for one to three months rose to 7.25 percent at the end of June, the highest since September last year, and compared with 6.97 percent at the end of March.

 

Private consumption is a critical element driving the Thai economy, accounting for half of its $490 billion GDP.

 

Consumers continued to borrow at a robust pace in the second quarter, when overall consumer debt rose 8 percent from a year earlier. That included a 6.2 percent rise in mortgage loans and a 12.4 percent jump in car loans.

 

But the risk is that an increasing debt burden will drag on Southeast Asia's second-largest economy.

 

The latest GDP figures for the second quarter showed the economy's expansion slowing down from the first quarter, although the state planning agency, the National Economic and Social Development Board, kept its 2018 growth forecast unchanged at 4.2-4.7 percent.

 

But economists said expansion remains heavily reliant on exports as the high levels of household debt weigh on consumers. That was underlined by a central bank index that showed private consumption did not grow in June from May.

 

DISTRESSED

JMT Network Services, Thailand's top unsecured consumer debt collector, expects consumer debt to rise further this year, with housing loans making up half of the total.

 

"As consumer loans increase, bad debt will also rise. Now we also see more secured loans, particularly home loans, turning sour. We are buying more of that too," Sutthirak Traichira-aporn, chief executive of JMT, which buys bad loans and provides debt collection services in Thailand.

 

JMT predicts a 30 percent rise in profit in 2018 on top of last year's record profit, Sutthirak said.

 

The firm manages 3.2 million distressed debt accounts worth 128 billion baht and aims to amass more this year, he said.

 

"We can buy any bad debt we want in the market. It's very big, much bigger than us," he said.

 

One struggling debtor, Rosukon Chakkrapongwan, fears she may lose her house as she struggles to keep up payments on a 4 million baht home loan she took up three years ago.

 

"It was not a problem two years ago. But this year, business is very bad as people don't spend," said the 44 year-old trader, who earns 30,000 baht a month selling cosmetics. More than half of that goes towards paying off her debt.

 

"I have failed to service my debt for three months now".

 

She also fears the worst if the central bank raises interest rates.

 

"This would make life even more difficult. I don't know if I can keep my house," she said. ($1=32.8 baht)

 

(Additional reporting by Kitiphong Thaichareon; Editing by Amy Sawitta Lefevre and Neil Fullick)

 

-- © Copyright Reuters 2018-08-31

[ukrules]

Time to buy shares in JMT ?

 

[Samui Bodoh]

I like to see economic stories from Reuters; I am sure that members notice that any economic story written by Thai people tends to be much more... er... ahem... rosy...

 

"...Consumers continued to borrow at a robust pace in the second quarter, when overall consumer debt rose 8 percent from a year earlier. That included a 6.2 percent rise in mortgage loans and a 12.4 percent jump in car loans..."

 

It is a bit of madness that borrowing continues to increase in light of the current household debt; one has to wonder how the poor (especially) will be able to pay it off. Further to the above I would love to get some accurate figures regarding government debt; the Junta has been on a spending spree and I cannot see where that money is coming from.

 

We all see Thais spending cash they don't have in order to 'look good'. However, the cycle simply cannot continue indefinitely and usually a government takes measures too curb excess borrowing.

 

Is the Junta willing to curb excess debt by Thai people? In the lead up to an election?

 

As the old Chinese curse goes, we are living in interesting times...

 

[ukrules]

2 minutes ago, Samui Bodoh said:

Is the Junta willing to curb excess debt by Thai people? In the lead up to an election?

Not a chance

[zzaa09]

The introduced ideals of mindless and needless consumption and accumulation. 

 

Living within your means is just a catch phrase, less a practice.

[MrLuckyThailand]

That people who borrows money must make a plan for beeing able to pay back the loan, that must come as an alien concept to these people.

 

Sometimes, I ask my wife if the phrase like "having a plan" exists in thai language. She just look at me and smile. The answer: "You know how it is, darling"

[faraday]

8 minutes ago, MrLuckyThailand said:

That people who borrows money must make a plan for beeing able to pay back the loan, that must come as an alien concept to these people.

 

Sometimes, I ask my wife if the phrase like "having a plan" exists in thai language. She just look at me and smile. The answer: "You know how it is, darling"

You surely mean 'People Everywhere' & not only Thailand?

 

 

[MrLuckyThailand]

2 minutes ago, faraday said:

You surely mean 'People Everywhere' & not only Thailand?

 

 

Yes, sure we can agree on that. It´s just that it seems to be more widespread and accepted to take it day by day in this country. During my years in Thailand, I can almost count the Thais I have met that really plans their life on my ten fingers.

[Cadbury]

Debt and corruption and self-interest is part of the national process of the country going down the gurgler.

It is only presently held afloat by foreign investment and technology and that will decline progressively the longer the junta remains in power. 

An honourable saviour of some sort is desperately needed. Heaven knows, their are plenty of dishonourable pretenders about.

 

 

[LazySlipper]

 

I have self-interest in saying this, but I really hope the bubble bursts soon and the Thai baht goes back to a good exchange rate.

 

[onlycw]

3 hours ago, ukrules said:

Time to buy shares in JMT ?

 

Mmm, who says that JMT will keep closing delinquent accounts and keeping up making money? What if they cannot? Then they will have bad debt on their books...

 

That borrower who hasn't paid her 15 k mortgage in 3 months: Lady, you have got your priorities wrong! As a business owner, I recall eating Rahmen noodle soup for weeks when times were tough.

 

Sell the car, get a motorcycle. Eat street food, buy bananas. Go get the AIS "Marathon" plan for your cell phone. Ditch the Iphone. Cancel Netflix, rely on Youtube. Get an antenna and strike a deal with a neighbor for sharing the wifi... Act!

 

I know a struggling builder. His 17 y.o. daughter was visiting Udon Thani and had to return to Bangkok. What did he do?

 

A: he took the big truck and drove her. Wasting, I reckon, 8 grand.

 

There was an excellent VIP service. She could sleep, be more comfortable. Give her 200 THB and a bus ticket and 800 THB would have seen her home. While he would be knackered. ** I see relatives with Ipad, new 50 k washing machines (why not get some SAMSUNG for like 10 k?). Then they bought a new Mazda for the daughter. 3 years later, it has lost 500 k in value. (In Bangkok, the daughter could use public transport but hey...)

 

A friend has been "hiding" the truck a finance company wants to reposess. This may affect his job as collections mount and desperation sets in. His commute has been 50 km return. Hey, get a room by the factory. Ride a motorcycle. Eat street food. You don't want that big Isuzu D-Max... There is life without a vehicle. Families make do with 1 or 2 motorcycles... Not paying the mortgage for months shows terrible judgment, JMHO.

[mikebell]

Debt repayment does not figure in Thainess.

[thonglorjimmy]

Meanwhile my credit card limit has just been increased from 465,000 Baht to 513,000 Baht, my average spend is 30 - 40,000 Baht a month, which is paid in full every month, sometimes more if I purchase flights or make hotel bookings, but still paid off in full every month.

This line of credit is offered to me as a retiree with with no job, just a pension, I wonder how many more people, Thai and foreigner, get this level of credit thrown at them but succumb to temptation and find themselves in difficulty.

[alant]

11 minutes ago, thonglorjimmy said:

Meanwhile my credit card limit has just been increased from 465,000 Baht to 513,000 Baht, my average spend is 30 - 40,000 Baht a month, which is paid in full every month, sometimes more if I purchase flights or make hotel bookings, but still paid off in full every month.

This line of credit is offered to me as a retiree with with no job, just a pension, I wonder how many more people, Thai and foreigner, get this level of credit thrown at them but succumb to temptation and find themselves in difficulty.

interested you have a credit card, when  I had one the only way I got it was to have double the sum of credit limit in the bank. Initially this was for security but later they basically locked it away (so it could not be used as say for my visa extension) Also my card and maybe your card also required full payment every month so it wasn't really a credit card it was an Amex style charge card.

Meanwhile my step daughter has more credit cards operating as credit cards than I can believe given her income. She seems to have no problem getting one where as I, who can service the debt cannot have one. Both factors are a part of the problem.

[theoldgit]

16 minutes ago, thonglorjimmy said:

I wonder how many more people, Thai and foreigner, get this level of credit thrown at them but succumb to temptation and find themselves in difficulty.

Rather like when Thais were encouraged to purchase new cars they neither needed or could afford, many of which were subsequently repossessed.

[thonglorjimmy]

3 minutes ago, alant said:

Also my card and maybe your card also required full payment every month so it wasn't really a credit card it was an Amex style charge card.

No, mine is a proper credit card, it is issued by Amex but I wasn't required to lodge a deposit.
They did try to get me to take one of their charge cards, offering all sorts of incentives, but the credit card more than meets my needs.

[alant]

2 minutes ago, thonglorjimmy said:

No, mine is a proper credit card, it is issued by Amex but I wasn't required to lodge a deposit.
They did try to get me to take one of their charge cards, offering all sorts of incentives, but the credit card more than meets my needs.

Thanks for that, how interesting is it classed as a Thai credit card? I have a UK card but that is £ sterling based.

[miamiman123]

Thai debt levels are nearly the same as Greece. 

[edwinchester]

Out here in the village people are really struggling with the low across the board agricultural returns.

Most have resorted to putting what land they have with the bank in return for cash to see them through.

The ease with which the bank hands the money over is both remarkable and disturbing with no questions asked about the ability to repay.

I can see alot of people losing their family land plots if the economy and prices paid to the farmers does not pick up very soon.

[anon537687643]

The percentage of Thais who borrow for simple basics such as food, accommodation and clothing is very small compared to those who borrow for, luxury goods , holidays , cars etc. It’s a case of don’t worry about the future, live for today!


Sent from my iPhone using Thaivisa Connect

[BuckleUp]

Definitely need those financed new cars to show the neighbours I've "finally made it". The pride driving around with a red number plate... talk of the village for weeks.

[BuckleUp]

1 hour ago, onlycw said:

 

 

I know a struggling builder. His 17 y.o. daughter was visiting Udon Thani and had to return to Bangkok. What did he do?

 

A: he took the big truck and drove her. Wasting, I reckon, 8 grand.

She'll make it up in no time at soi 3 and send the $ back to dad.

[Airalee]

18 hours ago, webfact said:

One struggling debtor, Rosukon Chakkrapongwan, fears she may lose her house as she struggles to keep up payments on a 4 million baht home loan she took up three years ago.

 

"It was not a problem two years ago. But this year, business is very bad as people don't spend," said the 44 year-old trader, who earns 30,000 baht a month selling cosmetics. More than half of that goes towards paying off her debt.

฿360,000 annual income with a ฿4,000,000 mortgage.

 

Thats more than 11x her annual income.  Remember when it was considered prudent to keep that ratio at no more than 2.5-3x annual income?

 

At 3% interest, the payment will be ฿16,864, so probably in line with what she says she pays monthly.  Hardly a usurious rate, but most likely just a teaser rate which she KNEW would raise after a limited time.  The rate information is easy to see on the bank websites so there shouldn’t be any “surprises”.

 

Of course, the bank shouldn’t have approved a loan at those ratios, but I have been told that some people fudge their income levels on the mortgage applications and some builders/developers can help the loan get approved.

 

Sounds familiar. Similar to the US circa 2005-2006.

[theoldgit]

51 minutes ago, alant said:

Thanks for that, how interesting is it classed as a Thai credit card? I have a UK card but that is £ sterling based.

I'm not sure what you mean by that observation, I also have an Amex credit card issued by Amex of Thailand, a number of other posters have also indicated they also have one over the years, so I suppose that makes it a Thai credit card.

[nong38]

Thais generally have never had any form of tutoring in how to hand money and finances, they see, they buy they cannot wait, must have it now ( impress the neighbours ). Money seems to burn their fingers, saving and financial planning are not in their make up, its part of Thai culture and society. I love when a Thai shows me his new car and I reply "Its very nice when are you getting a new one?" 

They just get more and more loans to try and pay off the previous ones, they don't care if they don't pay it back, they don't care who they borrow from, its a spiral, once in you can never get out, well there is one way via the temple smoke stack, but good whilst it lasted but leaving a trail of debts for someone else to pick up. Can never see this changing.

Never give a loan to a Thai, give means exactly that you can wave it goodbye.

[Srikcir]

6 hours ago, webfact said:

As debt levels rise, more Thais struggle to keep up

When you're a Made Man there's no struggle:

PM happy with better economic conditions in Thailand  

Prime Minister Prayut Chan-o-cha has expressed his satisfaction with people’s confidence in the Thai economy and vowed to continue to solve income problems for them, particularly the less-fortunate people. 
https://www.thaivisa.com/forum/topic/1052623-pm-happy-with-better-economic-conditions-in-thailand/?utm_source=newsletter-20180813-1234&utm_medium=email&utm_campaign=news

PM satisfied with farm debt solutions 

Government Spokesperson Lt Gen Sansern Kaewkamnerd said the prime minister is satisfied with the work of the government-appointed debt relief committee tasked with assisting members of the Farmer's Reconstruction and Development Fund. 

https://www.thaivisa.com/forum/topic/1052576-pm-prayut-satisfied-with-farm-debt-solutions/?utm_source=newsletter-20180813-0652&utm_medium=email&utm_campaign=news

[Nice Boyd]

Farangs may become popular again with Thai Girls

[Peterw42]

Its the tip of the iceberg, these stories and threads are only ever discussing the official and acknowledged debt. There is also the loan sharks, pyramid/share schemes etc. The more Thai friends and neighbours I get to know, the more I see of the hidden debt.

I dont know many Thais that dont have a level of debt that takes most of their income to service, or have a level of unofficial debt.

Its seriously a house of cards, a bubble waiting to burst.

[lanista]

4 hours ago, MrLuckyThailand said:

That people who borrows money must make a plan for beeing able to pay back the loan, that must come as an alien concept to these people.

 

Sometimes, I ask my wife if the phrase like "having a plan" exists in thai language. She just look at me and smile. The answer: "You know how it is, darling"

The only financial plan Thai girls have is to marry old foreign men.  Get him to pay all the family debts and look after the Thai men's children.

Thais build up debt and farangs pay for it.

[Ban Phe Dezza]

What about the folks who borrow at 6% interest a Month, it happens Trust me. also in my small Soi a Gentleman does the rounds daily collecting repayments.  Usually interest only. Of course the locals can never pay of the debt The local enforcers ( Collectors) are well known even to Fallangs.