Household debt in Thailand soars to 86.9% of GDP, dampening consumer spending

[webfact]

 

Thailand’s mounting household debt is raising concerns, as it continues to hinder consumer spending, affecting various industries and impeding economic growth.

 

The latest data from the National Economic and Social Development Council shows debt in the nation reached 15.1 trillion baht in the fourth quarter of 2022, a 3.5% increase year on year, and accounting for 86.9% of GDP. Debt levels remain alarmingly high, as the major factors behind rising household debt are real estate purchases and personal loans.

 

Despite a slow rate of decline, it is anticipated to take a considerable time for household debt to reach the Bank of Thailand’s target level of 80% of GDP. The central bank warned that debt levels surpassing 80% of GDP pose a risk to the country’s financial stability and long-term economic growth. It is predicted that without implementing debt restructuring measures, household debt is expected to tally 84% of GDP by 2027.

 

According to Kasikorn Research Center (K-Research), Thailand’s household debt-to-GDP ratio is expected to decline to between 85.5 to 86% in 2023, due to GDP expansion and retail loan repayments. This includes repayments on credit cards and mortgages during seasonal periods. However, the ratio remains high at 86.9% as GDP growth aligns with the nation’s economic recovery. Over the long term, K-Research expects retail loans in the Thai banking system to grow at a slowed pace of 3 to 3.5% compared to the previous average of 6.0% over the past five years.

 

by Alex Morgan

Photo Courtesy of Freepik

 

Full story: https://thethaiger.com/hot-news/economy/thai-household-debt-soars-to-86-9-of-gdp-dampening-consumer-spending

 

-- © Copyright Thaiger 2023-06-19

 

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[ikke1959]

Good job of the military based Government.. They like that everything goes up especially their accounts too... Shameful that a few super rich don't care about the common people, but only promote holidays, spending , beauty instead of education in  how to deal with your money, or decent wages  

[hotchilli]

3 hours ago, webfact said:

Thailand’s mounting household debt is raising concerns, as it continues to hinder consumer spending, affecting various industries and impeding economic growth.

What is affecting consumer spending now are the low wages compared to living costs.

Eventually after borrowing has come to it's limit there is no more money to spend.

People have been borrowing for the last decade to keep going and now the bubble is about to burst.

 

[huangnon]

The "soft loans" handed out to people during the past few years are a time-bomb for the next Government.

[ThailandRyan]

A ticking time bomb and a huge bubble seems ready to burst.  Standby if your extended family is at the end of there credit lines.  A few years back I watched as a Family in Udon Thani, just outside of town on the ring road, just packed up the truck one day and left the house they had been buying from the bank.  Left the doors wide open. Apparently they did let the bank know and within a few hours after they left a bank employee showed up with a handyman.  This was in a newer Moo Ban near the airport, near a friend of mine.  I just happened to be visiting when this all went down.  The bank employee took photos inside and out, and then the handyman secured the doors with new hasps and locks as well as placing a lock on the gate. My friend indicated that he had heard, from his wife, that they had a business that failed as well and owed many creditors.

 

One has to wonder what people own the local loan sharks in addition to the banks.

[Mr Meeseeks]

Most 'normal' Thais I know are in debt which they are unable to repay.

 

Always trying to borrow more money to pay off other debts.

 

Never a borrower or a lender be.

[Cake Monster]

The really scary part of the 86.9 % Household Debt to GDP for me is how the debt is made up.

Only approximately 20 % of that Debt is Secured against Mortgages Etc

The other 80 % is made up of Loans that are issued for potential Toxic Vehicle Loans, Motorcycle Loans, White Goods and Credit Card Loans Etc. All of which are unsecured.

It has already been widely reported that some 90,000 Vehicles had been repossessed in the first 5 Months of the Year, and a warning issued that the number could rise to nearly a Million by the Years end, such is the problem of non payment.

The Banks can repossess, but they are just adding Toxic Debt to their asset to  Loan Ratios, and this is not the way to try and hide NPL from the Market Place and Investors.

Banks holding Toxic Debt is very bad

As an add on, this 87 % Debt if it is to ne believed, is only a part of the massive debt problem in Thailand with many Trillions of Baht issued in Loans by " Grey Banking " to people that have little or no hope of ever repaying their high interest rates

Me thinks Thailand's Consumer Society dreams are about to explode

 

[WashingUpagain]

It's difficult to get a perspective on wealth in Thailand. I lived in Chiang Rai and I was always amazed at the amount of Mercs and Beamers on the road and the numbers seemed to be increasing. I was told they had BKK plates on them. Mores the pity if they have been buying cheaper property up north as the smog is a shocker and they will soon regret their purchase. Due to the air quality, quite a number of 'Farang' acquaintances I met were considering moving down south or quitting Thailand altogether. Economics 101, people are the economy and Thailand needs an influx of tourists and retirees in order for the economy to grow and for Thais to prosper. My anecdotal perspective is one of sadness, despite the nice cars, people seem to be struggling, but still smiling.

[bkk6060]

Lots of people I bet pay 30 to even 50% of salary on a car payment.  Got to look hiso in a Fortunner.

[Mitkof Island]

I have been noticing over the last ten years of the millions of new cars in Thailand. Wondering where all this money is coming from. They can barely eat but have a new car to show off.

[ozz1]

I love Thai people but it's all about show new car new phone big house and unfortunately the banks still keep lending them money it has to come down to earth someday

[mommysboy]

Somewhere in the article, a vulnerable household is defined as one earning less than 50k a month.  I can't help but think there must be many millions of such households.

[chalawaan]

Missus had a government employee pal who was fired for corruption!

We rented her defaulted and fully furnished Korat bungalow for 5K a month while our BKK apartment was refurbished to lease, the juristic fees on our apt are nearly 9K!

The bank showed up early, but not before we had the apartment sorted.

 

With owners permission, we had the aircons stripped out, and took them to our other place in Chiang Mai that we had to leave empty while BKK work was being done, as it was a days ride to the apt in Bangkok. 

[BangkokReady]

3 hours ago, ozz1 said:

I love Thai people but it's all about show new car new phone big house and unfortunately the banks still keep lending them money it has to come down to earth someday

The addiction to "newness" is most unusual.  You really see it with building work.  Cleaning and upkeep just don't seem to be a thing.  It's just new or left to crumble.

 

It's like some Thais view it as only new things allow them to "gain face", so maintenance is pointless.

[Cake Monster]

21 hours ago, bkk6060 said:

Lots of people I bet pay 30 to even 50% of salary on a car payment.  Got to look hiso in a Fortunner.

A few years ago, " Bloomberg" described Thailand as a Nation full of people driving around in BMW Cars, but living in Tin Shacks

Never more true than it is today

[zzaa09]

On 6/18/2023 at 11:47 PM, hotchilli said:

What is affecting consumer spending now are the low wages compared to living costs.

Eventually after borrowing has come to it's limit there is no more money to spend.

People have been borrowing for the last decade to keep going and now the bubble is about to burst.

 

It appears that living beyond one's means is a universal trait. 

You're comments above hold true regarding the expanding prices everything and anything, while wages/salaries remain stagnant. These inconsistencies of everyday life and the added consciousness of unnecessary consumption and accumulation naturally drive the need to loan and extend exhaustive credit......

[cncltd1973]

this place is sounding more and more dangerous

[WashingUpagain]

I'm always baffled at prices here. I like Fishermen's Friends and buy a packet when ever I shop at 7/11. A friend pointed out that the young girl serving, needs to work an hour to buy a packet at 36baht. Also, she has a couple of Thai builders working on an extension for her, she pays them 400baht a day. They work from 8 till 5 with an hour for lunch. "are they any good I asked", "their work is great" she replied. How is this even possible with food prices being so high? Big C are almost as expensive as London and if you want imported fare you'll easily pay double. Could be why every Big C I visit is usually quite empty, wonder how they make any money. Sometimes there are more staff than customers...maybe it's just me.

[jacko45k]

17 hours ago, Cake Monster said:

A few years ago, " Bloomberg" described Thailand as a Nation full of people driving around in BMW Cars, but living in Tin Shacks

Never more true than it is today

Very much so.... I used to eat every Friday at a great 'restaurant' in a tin shack village nearby and there was quite a collection of good vehicles in front of these one room hovels. Even the poorer ones had red plate PCX motorcycles.

[Digitty]

Holy cow I knew it was really bad but didn't realize it was quite that bad. 

[2baht]

On 6/19/2023 at 1:56 PM, huangnon said:

The "soft loans" handed out to people during the past few years are a time-bomb for the next Government.

Well let's borrow some more! 

[Walker88]

On 6/19/2023 at 9:12 AM, Cake Monster said:

The really scary part of the 86.9 % Household Debt to GDP for me is how the debt is made up.

Only approximately 20 % of that Debt is Secured against Mortgages Etc

The other 80 % is made up of Loans that are issued for potential Toxic Vehicle Loans, Motorcycle Loans, White Goods and Credit Card Loans Etc. All of which are unsecured.

It has already been widely reported that some 90,000 Vehicles had been repossessed in the first 5 Months of the Year, and a warning issued that the number could rise to nearly a Million by the Years end, such is the problem of non payment.

 

 

90,000 in 5 months? Staggering number, given total yearly car sales in Thailand run about 750,000. Banks should be holding fire sales at least to realize something for the asset, but I suspect they are somehow holding on to these as 'good assets' at full theoretical 'market' value.

 

Parsing the debt numbers, it seems all Thai economic growth has been debt based. I remember one stat that corporate debt levels grew by 11% per year from 2010-2020, while GDP growth lagged that number considerably.

 

Maybe Thailand is just catching up to worldwide debt patterns, but there is a danger when your economy is based on cheap labor, not technological innovation. There's always another country who can undercut price or attract the owners of aging facilities who need to replace them.

 

While some growth is due to agricultural exports, the drought is not going to help that.

 

A final point of concern is non-bank supplied debt, as in loan sharks. Who is a Thai going to try to repay first, the loan shark who can exert some serious pressure, or a bank that is less likely to employ aggressive collectors? Easy to imagine NPLs are just going to keep climbing.

 

This all went bad during the reign of the junta, reflecting its lack of expertise in running a modern economy. Hopefully the new government will both have ideas and be willing to tell it like it is.

 

 

[SoilSpoil]

3 hours ago, Walker88 said:

 

 

This all went bad during the reign of the junta, reflecting its lack of expertise in running a modern economy. Hopefully the new government will both have ideas and be willing to tell it like it is.

 

 

Thaksin's early TRT policies were already aimed at increasing consumer debt in order to stimulate the economy.

[itsari]

Interest rates on savings are 1 percent to 1,5 percent . 

Why is it that Vietnam and Cambodia have over 6 percent on offer for savings accounts .

I think the debt problem in Thailand would bring the banks down if they offered the same interest rates as there neighbouring countries . 

[h90]

On 6/20/2023 at 3:45 PM, Cake Monster said:

A few years ago, " Bloomberg" described Thailand as a Nation full of people driving around in BMW Cars, but living in Tin Shacks

Never more true than it is today

But it is understandable....Thailand is warm, a well maintained heated house is not that important if there is never a winter. Some Shacks are good enough to protect you from the weather,

[BritManToo]

10 minutes ago, h90 said:

But it is understandable....Thailand is warm, a well maintained heated house is not that important if there is never a winter. Some Shacks are good enough to protect you from the weather,

Or as a Thai man once said to me ........ my shack is for the wife and kids ..... my gfs only ever see my new car.

[MrMojoRisin]

2 hours ago, SoilSpoil said:

Thaksin's early TRT policies were already aimed at increasing consumer debt in order to stimulate the economy.

Nonsense.

Thaksin funnelled a bucketload of public money into the hands of the poor and made it easier for them to acquire legitimate credit to reduce their reliance on loan sharks charging 20% per month.

 

[SoilSpoil]

6 hours ago, MrMojoRisin said:

Nonsense.

Thaksin funnelled a bucketload of public money into the hands of the poor and made it easier for them to acquire legitimate credit to reduce their reliance on loan sharks charging 20% per month.

 

You are wrong.

 

https://www.financeasia.com/article/thailands-economic-populism/28909

[Lucky Bones]

On 6/19/2023 at 4:17 PM, hotchilli said:

What is affecting consumer spending now are the low wages compared to living costs.

Eventually after borrowing has come to it's limit there is no more money to spend.

People have been borrowing for the last decade to keep going and now the bubble is about to burst.

 

Borrowing never ends.

First it is the bank(s), then friends, family, children, Mom & Pop shop.......????????

[MrMojoRisin]

6 hours ago, SoilSpoil said:

You are wrong.

 

https://www.financeasia.com/article/thailands-economic-populism/28909

From your link:

 

Thaksin promised to create a debt management company to remove bad assets from the country's banks and eliminate significant amounts of private and public sector corporate debt.

 

and

 

Another economic crisis driven by over-extended consumers and unproductive investment is improbable over the next several years

 

Also, there is no mention of off book loanshark debt issues that plague(d) the country.

 

Wrong? I think not.