Thai households struggle with record debt, COVID-19 increases burden

[webfact]

FILE PHOTO: People wearing face masks as a measure to prevent the spread of the coronavirus disease (COVID-19) are seen at a train station in Bangkok, Thailand, January 7, 2021. REUTERS/Athit Perawongmetha

 

By Orathai Sriring and Satawasin Staporncharnchai

 

BANGKOK (Reuters) - Thai farmer Jamras Kongchai is struggling to pay off 500,000 baht ($16,082) 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 $10 a day for much needed extra income.

 

"I'm so heavily indebted and don't know what to do," said the 51-year-old, single mother of two, who travelled from the northern province of Kamphaeng Phet to join a demonstration of indebted rice growers in Bangkok late last month, asking the government to help reduce their debt burden.

 

Jamras has only repaid some of the interest since 2013, and hasn't put a dent in the principle. This year, she has to pay 40,000 baht in interest, but she has no money. "I hope to get some help".

 

Such protests have put further pressure on the Thai 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 14 trillion baht, or 89.3% of gross domestic product (GDP) by the end of December, 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 in Southeast Asia’s second-largest economy, impeding a recovery from the coronavirus crisis. The economy suffered its deepest slump in over two decades last year as exports shrank and the vital tourism sector reeled from the absence of foreign visitors.

 

New COVID-19 outbreaks have added to the pressure on some businesses and households, the central bank said last month, when it cut its 2021 gross domestic product (GDP) growth outlook to 3% from 3.2%, noting the economy would not return to pre-pandemic levels until mid-2022.

 

While the latest flareup 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 the first quarter.

 

The government has promised 1 trillion baht in relief to ease the impact of the outbreak, but some say relief is not being rolled out fast enough for many Thais. Last year, a woman took rat poison outside the finance ministry to protest the slow response. She survived and was promised her payment days later.

 

DEBT MOUNTAIN

The growing debt burden is likely to curb private consumption, which accounts for half of Thailand's $502 billion GDP, and will hurt lenders' earnings if more loans turn sour.

 

To be sure, the pandemic slowed down loan demand last year, but the slumping economy also made it more difficult for people to repay their loans.

 

Consumer loans rose 4.6% last year, 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.

 

Still, lender Muangthai Capital, remains upbeat, targeting annual loan growth of 20-25% over the next four years.

 

"The industry still has ample room to grow", said deputy managing director Parithad Petampai, noting the firm’s lending increased 10-fold to 70 billion baht last year from 2014.

 

For years, easy credit for consumers and businesses has prompted many warnings about the dangers of rising household debt in Thailand, and now the pandemic has left millions of people out of work.

 

About 4.7 million workers are at risk of being affected by the outbreak, of which 1.2 million workers might become unemployed or underemployed, the central bank said in January.

 

Even after the economy has recovered and more jobs are available, the debt overhang will take a long time to tackle.

 

"We may earn more but that will go to debt servicing, not much left to spend," said Aree Onkloi, 22, worker from the northern province of Phitsanulok, whose family owes nearly a million baht.

 

"We will have to keep borrowing and never get out of it".

 

($1 = 31.09 baht)

 

(Reporting by Orathai Sriring, Satawasin Staporncharnchai and additional reporting by Kitiphong Thaichareon,; Editing by Kay Johnson and Kim Coghill)

 

-- © Copyright Reuters 2021-04-05

 

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[SmartyMarty]

It will be interesting to follow the governments reaction to this over the coming year.

[PatOngo]

3 minutes ago, webfact said:

"I'm so heavily indebted and don't know what to do,"

Well duh! Here's a tip.....Live within your means!

[gt162]

Open the border for fully vaccinated tourists with covid19 tests negative before and after arriving in Thailand to help out with the Thai economy.

 

No quarantine now to get tourists to return should help.

Edited April 5, 2021 by gt162

[Fex Bluse]

45 minutes ago, webfact said:

"Even before COVID, our debt to GDP was already the highest among emerging markets," said Yunyong Thaicharoen, chief economist at Siam Commercial bank.

 

Good morning Khun @sandyf. I guess this is another reason the Thai domestic tourism could not replace the international tourism. No money to spend.

[Mr Meeseeks]

17 minutes ago, gt162 said:

Open the border for vaccinated tourists with covid19 tests negative before and after arriving in Thailand to help out with the Thai economy.

 

Don't wait till later but do it now.

The majority of the Thai population needs to be vaccinated first to prevent a complete disaster. 

 

The border closures are probably the main reason why the outbreak has been so effectively controlled in Thailand.

[mikebell]

2 hours ago, webfact said:

Thai households are among the biggest borrowers in Asia,

Because they have no compunction to repay a loan; they expect (& get) in many cases banks to forgive/write off the debt + Gov often comes up with some freebies.

[DLock]

Don't worry. Just 1-month ago, the Finance Ministry said "Most household debt is good debt".

 

 

[robblok]

28 minutes ago, mikebell said:

Because they have no compunction to repay a loan; they expect (& get) in many cases banks to forgive/write off the debt + Gov often comes up with some freebies.

Yes farmers will protest will get some kind of discount on loans. Teachers have a problem the government bails them out. Plenty of examples where the goverment bails people out. By doing this they create a situation where people think that there will be someone to bail them out.

 

But on the other hand unlike in the west there is no social security so this is just the way of the goverment to help. But its a bad thing because only who shout the most get helped. (farmers / teachers / army / police / goverment employees) all have in the past had help with their loans. Restructuring.. write off ect.

[Fat is a type of crazy]

3 hours ago, PatOngo said:

Well duh! Here's a tip.....Live within your means!

I concur in regard to consumers who lived way beyond their means buying handbags and phones. 

When you are poor though and starting or running a business it's not easy to be successful without debt. Interest rates for the  poor, without assets to mortgage, are normally high . 

They didn't see covid coming. It's tough.

 

 

[Pattaya Spotter]

26 minutes ago, robblok said:

 

But on the other hand unlike in the west there is no social security so this is just the way of the goverment to help.

Actually there is a social security pension scheme in ????????...ask any employer. However, many job classifications are not included in it. 

[ChipButty]

If the police have a problem, they just setup more road blocks

[RichardColeman]

I know many people here keep saying keep the borders shut, wait till zero spread and no mutation. But, this sort of debt shows why we need to stop all this nonsense sooner rather than later.

 

Open up to the vaccinated, no hoops, just evidence of vaccinated. When I book a holiday, I book maybe 3 things. The flight, the hotel and a taxi - Thailand adding addition 10,000 clauses into the mix will deter tourists and get them going somewhere else.

 

Thailand needs tourist money injection now, not later. Other countries can revamp their economy with taxation on the public - I don't know anyone in thailand that works that actually pays tax !

[Venom]

They need more credit and "soft" loans so they can get in deeper. That'll fix it. 

[sammieuk1]

On the bright side generals are doing rather nicely ????

[hotchilli]

8 hours ago, SmartyMarty said:

It will be interesting to follow the governments reaction to this over the coming year.

Household debt is within limits... the usual rubbish.

With a normal small rice farmer how do they get to 500,000 baht debt?

The lenders are obviously out of line?

[Albert Zweistein]

Jamras has only repaid some of the interest since 2013

Means she was in financial trouble long befor Corona.

 

Or 89.3 of GDP

So what on earth is keeping the exchange rate of the baht so high ?

[rken2]

11 hours ago, Albert Zweistein said:

Jamras has only repaid some of the interest since 2013

Means she was in financial trouble long befor Corona.

 

Or 89.3 of GDP

So what on earth is keeping the exchange rate of the baht so high ?

everyone else's debt to GDP is much higher, You asked

[starky]

On 4/5/2021 at 10:47 AM, PatOngo said:

Well duh! Here's a tip.....Live within your means!

Geez mate your all heart

[robblok]

12 hours ago, Albert Zweistein said:

Jamras has only repaid some of the interest since 2013

Means she was in financial trouble long befor Corona.

 

Or 89.3 of GDP

So what on earth is keeping the exchange rate of the baht so high ?

Currency levels are usually influenced by the trade balance. There is still more foreign currency flowing in then out. As long as it stays that way your currency stays up. This has nothing to do with it (not directly anyay)

[PatOngo]

40 minutes ago, starky said:

Geez mate your all heart

My heart bleeds 

[Fex Bluse]

On 4/5/2021 at 12:08 PM, robblok said:

Yes farmers will protest will get some kind of discount on loans. Teachers have a problem the government bails them out. Plenty of examples where the goverment bails people out. By doing this they create a situation where people think that there will be someone to bail them out.

 

But on the other hand unlike in the west there is no social security so this is just the way of the goverment to help. But its a bad thing because only who shout the most get helped. (farmers / teachers / army / police / goverment employees) all have in the past had help with their loans. Restructuring.. write off ect.

Agree. It's also a challenge because the people know how corrupt they are as a society and how utterly corrupt people with authority are. So, their thinking is "we know you all are stealing, so help us out". 

 

It's a race to the bottom. 

[Golden Triangle]

On 4/6/2021 at 3:40 PM, PatOngo said:

My heart bleeds 

Would that be Purple urine ????

[PatOngo]

1 minute ago, Golden Triangle said:

Would that be Purple urine ????

I have no idea what you are on about!

[Golden Triangle]

2 minutes ago, PatOngo said:

I have no idea what you are on about!

The saying I normally use is my heart bleeds purple p!55