Political parties can no longer evade household debt crisis facing Thailand

[webfact]

 

Household debt has become an alarming issue for the country, and as Thailand heads towards a general election this year, it’s a ticking bomb that needs the urgent attention of political parties making policy pledges to voters. 

 

Household debt had risen to 14.9 trillion baht in the third quarter of last year, equivalent to 87 percent of gross domestic product (GDP). “As an international benchmark, the Bank for International Settlements (BIS) warns a household debt-to-GDP ratio at 80 percent is a cause for alarm,” said Suwannee Jatsadasak, assistant governor of the Bank of Thailand (BOT).

 

Sharp increase

 

Thailand’s household debt has seen a sharp increase over the past 10 years from 59.3 percent of GDP in 2010 to 86.9 percent in the third quarter of last year.

 

Full story: https://www.thaipbsworld.com/political-parties-can-no-longer-evade-household-debt-crisis-facing-thailand/

 

-- © Copyright Thai PBS 2023-03-06

 

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[sidjameson]

87% is nothing. I know thais with debts of three times annual earnings or more, excluding mortgage.

[fdimike]

Big eyes small wallets with zero common sense.  I would be willing to bet that the majority are government workers/teachers/nurses who don't know how to manage their money.

[VinnieK]

Thais luúurve debt.

They think repayment is a million years away.

 

 

 

 

[ozz1]

Yes and they will keep lending money out to people who can't afford it  new cars everywhere it's all about show all thinking that they will win the lottery next

[hotchilli]

2 hours ago, webfact said:

Household debt has become an alarming issue for the country, and as Thailand heads towards a general election this year, it’s a ticking bomb that needs the urgent attention of political parties making policy pledges to voters. 

More broken promises.

[2baht]

20 minutes ago, ozz1 said:

Yes and they will keep lending money out to people who can't afford it  new cars everywhere it's all about show all thinking that they will win the lottery next

Luckeee! Let's borrow some more! 

[zzaa09]

17 minutes ago, hotchilli said:

More broken promises.

Yet, what do any such government policies have to do with resolving personal/household debt.

Seems to me it all comes back to the responsibility of the individual[s].

[Shop mak]

Blame the banks and credit card companies.

Blame a sick unhealthy, 'I must have the latest newest car, motorcycle, mobile phone'.

 

Stop offer new cars with only 5-10% downpayment.

 

Teach them simple mathematic in school, without using a calculator.

[zzaa09]

7 minutes ago, Shop mak said:

Blame the banks and credit card companies.

Blame a sick unhealthy, 'I must have the latest newest car, motorcycle, mobile phone'.

 

Stop offer new cars with only 5-10% downpayment.

 

Teach them simple mathematic in school, without using a calculator.

Mindless consumption and accumulation.

Living within one's means.

[ThailandRyan]

3 hours ago, webfact said:

Household debt had risen to 14.9 trillion baht in the third quarter of last year, equivalent to 87 percent of gross domestic product (GDP).

If this is where household debt sits the countries households are technically bankrupt. There is no way in hell without debt restructuring or loan forgiveness thT these households can ever become debt free with the pay folks here make in their daily jobs.  Time for the banks to start listing all of the NPL and file. Many banks must also be in debt at this j7ncture and a government bailout will be needed just like when the US had its Savings and Loan crisis.   Looks like some banks might end up failing.

[zzaa09]

22 minutes ago, ThailandRyan said:

If this is where household debt sits the countries households are technically bankrupt. There is no way in hell without debt restructuring or loan forgiveness thT these households can ever become debt free with the pay folks here make in their daily jobs.  Time for the banks to start listing all of the NPL and file. Many banks must also be in debt at this j7ncture and a government bailout will be needed just like when the US had its Savings and Loan crisis.   Looks like some banks might end up failing.

Why bother with all this.

The wealth is false anyway. 

[RichardColeman]

My Thai wife finds it hard to accept that people of similar income in my home UK do not have brand new cars and pick-ups lining the street, but only cars from Arthur Daley types !

 

Think its the idiot lenders fault more than the idiot financial over-reaching average Thai.

 

Flip flop on the right feet ? OK, here's the keys to a new house and pick up

[bkk6060]

Credit is extremely liberal and easy to get.  50% of income for a car payment is insane,  but not uncommon.

[Henryford]

.

 

Edited March 6, 2023 by Henryford

[phetphet]

It amazes me, the amount of Thai that have brand new pickup trucks on the knock. 

God knows how much it must cost them in the long run. That is if they  ever finish paying for it.

Unlike property, cars depreciate from the moment they leave the showroom, (unless it's some rare Ferrari) so if the buyers default, the lenders probably won't get all their money back.

 

I know someone that has a new PCX over seven years. Will pay almost double by the end of the loan term.

 

[jacko45k]

1 minute ago, phetphet said:

It amazes me, the amount of Thai that have brand new pickup trucks on the knock. 

4-5 years ago they all  seemed to have a brand new PCX on the never never too.  Used to be surprised how many were parked in front of their one room very basic homes. 

[zzaa09]

43 minutes ago, RichardColeman said:

My Thai wife finds it hard to accept that people of similar income in my home UK do not have brand new cars and pick-ups lining the street, but only cars from Arthur Daley types !

 

Think its the idiot lenders fault more than the idiot financial over-reaching average Thai.

 

Flip flop on the right feet ? OK, here's the keys to a new house and pick up

Indeed.

We might see a different society if the financial institutions weren't so loose and easy as to their loaning policies. 

They do need to tighten up. 

[ThailandRyan]

11 minutes ago, phetphet said:

It amazes me, the amount of Thai that have brand new pickup trucks on the knock. 

God knows how much it must cost them in the long run. That is if they  ever finish paying for it.

Unlike property, cars depreciate from the moment they leave the showroom, (unless it's some rare Ferrari) so if the buyers default, the lenders probably won't get all their money back.

 

I know someone that has a new PCX over seven years. Will pay almost double by the end of the loan term.

 

Yes, double the cost over time and they don't seem to understand they could have bought 2 for the same price. Then after paying for 7 years the one they have must be replaced.....

[proton]

House opposite us was abandoned a few months ago, I always thought they were doing well. Fruit business, brand new ford pick up/motorbikes. Suddenly they did a midnight run to get away from creditors chasing them, place is overgrown and messages and bills stuck in the gate. He has become a monk the others up country. 

Edited March 6, 2023 by proton

[jacko45k]

2 minutes ago, proton said:

House opposite us was abandoned a few months ago, I always thought they were doing well. Fruit business, brand new ford pick up/motorbikes. Suddenly they did a midnight run to get away from creditors chasing them, place is overgrown with messages and bills stuck in the gate. He has become a monk the others up country. 

Had a German guy do that opposite me...... there followed a few weeks of people he had 'invested' on the behalf of visiting and peering through windows.  

Edited March 6, 2023 by jacko45k

[proton]

25 minutes ago, phetphet said:

It amazes me, the amount of Thai that have brand new pickup trucks on the knock. 

God knows how much it must cost them in the long run. That is if they  ever finish paying for it.

Unlike property, cars depreciate from the moment they leave the showroom, (unless it's some rare Ferrari) so if the buyers default, the lenders probably won't get all their money back.

 

I know someone that has a new PCX over seven years. Will pay almost double by the end of the loan term.

 

Chinese Thais seem to differ, last thing they will splash out on is new cars, education comes first and sensible business practices.

[zzaa09]

5 minutes ago, proton said:

Chinese Thais seem to differ, last thing they will splash out on is new cars, education comes first and sensible business practices.

.....and wedding tamboons. 

[Thingamabob]

The Thai government's failure to address this issue was one of the factors leading to the financial crash of 1997/8.

[bangon04]

3 hours ago, hotchilli said:

More broken promises.

“Pheu Thai has policies to fight poverty...."    I read this in another thread. So there is absolutely no need to worry. 

[bangon04]

3 hours ago, Shop mak said:

Teach them simple mathematic in school, without using a calculator.

Maybe have a lesson called "The Piggy Bank"  

[bangon04]

1 hour ago, proton said:

Chinese Thais seem to differ, last thing they will splash out on is new cars, education comes first and sensible business practices.

and that explains so much about the structure of Thai society.

[Walker88]

"Thailand’s household debt has seen a sharp increase over the past 10 years from 59.3 percent of GDP in 2010 to 86.9 percent in the third quarter of last year. "

 

If one looks at this trend in combination with the increase in corporate debt over the same period, it becomes clear that Thailand's so-called economic boom of 2010-20 was debt-driven growth, not organic growth.

 

If I remember correctly (can't find the data), corporate debt in Thailand average 11% growth per year over that time period. With monthly export numbers falling recently, it is likely NPLs are on the rise.

 

The household sector debt is unlikely to include loanshark data, so the actual debt/GDP is probably higher, and loanshark debt is most likely to be repaid before bank debt, since banks have less 'convincing' ways of encouraging repayment.

 

Thailand is not alone in this debt growth, but may be less able to handle it, as its system is neither as flexible nor experienced. The world has held off Recession longer than most pundits thought, but with debt increasing almost everywhere and rates rising at the same time, holding off Recession will become increasingly difficult. Covid changed some attitudes (spend now because we might die in the next pandemic, bring supply chains inside our borders rather than rely on Asian production), and these have yet to be fully felt.

 

Not sure if there is any safehaven if Recession hits. Not property, not precious metals, not crypto, as each of those has issues related to debt or corruption or what is likely to be deflationary pressures. Maybe the safehaven is cash in a currency of whatever nation or area one feels is best able to cope. I can actually envisage a scenario of hyper-DEFLATION, kind of the opposite of 1921 Weimar Germany.

[Enzian]

Indeed how can the government address the issue without generating moral hazard and eventually leading to more debt? Are there any examples of bailouts (other than a few genuine examples of force majeure) that actually made things better over time? It would seem that better underwriting is the only sensible approach. And why is underwriting by Thai lenders apparently so bad?

[ThailandRyan]

48 minutes ago, Walker88 said:

"Thailand’s household debt has seen a sharp increase over the past 10 years from 59.3 percent of GDP in 2010 to 86.9 percent in the third quarter of last year. "

 

If one looks at this trend in combination with the increase in corporate debt over the same period, it becomes clear that Thailand's so-called economic boom of 2010-20 was debt-driven growth, not organic growth.

 

If I remember correctly (can't find the data), corporate debt in Thailand average 11% growth per year over that time period. With monthly export numbers falling recently, it is likely NPLs are on the rise.

 

The household sector debt is unlikely to include loanshark data, so the actual debt/GDP is probably higher, and loanshark debt is most likely to be repaid before bank debt, since banks have less 'convincing' ways of encouraging repayment.

 

Thailand is not alone in this debt growth, but may be less able to handle it, as its system is neither as flexible nor experienced. The world has held off Recession longer than most pundits thought, but with debt increasing almost everywhere and rates rising at the same time, holding off Recession will become increasingly difficult. Covid changed some attitudes (spend now because we might die in the next pandemic, bring supply chains inside our borders rather than rely on Asian production), and these have yet to be fully felt.

 

Not sure if there is any safehaven if Recession hits. Not property, not precious metals, not crypto, as each of those has issues related to debt or corruption or what is likely to be deflationary pressures. Maybe the safehaven is cash in a currency of whatever nation or area one feels is best able to cope. I can actually envisage a scenario of hyper-DEFLATION, kind of the opposite of 1921 Weimar Germany.

You make some good points but I am sure the forums resident economic guru will says this is just one month and the economy and GDP are doing well and notjings hidden. Yet you can't predict the future from just one month, but oh yes we can...a big correction will be coming for many I fear. Time to be liquid and gave cash and gold on hand I am afraid.