Thai government seeks urgent economic stimulus amid rising household debt

[webfact]

 

The economy is in a dire state and in urgent need of a stimulus package to prevent further deterioration, according to the government.

 

This stance arises amid ongoing discussions about the true state of the economy, with some expressing doubts about the actual need for the government’s proposed US$313 million handout scheme, which would necessitate a loan of US$15.6 billion.

 

Prommin Lertsuriyadet, the secretary to the prime minister, informed that several indicators depict slower growth compared to other regional countries, along with increasing household debt. This places the nation firmly within the grip of a crisis. He warned that without government intervention to stimulate the economy, the situation could rapidly worsen.

 

Prommin expressed the government’s view of every single individual as an economic engine to create growth. He added that the proposed US$313 million handout scheme, supported by blockchain technology, is considered the most effective way to reboot the economy. This policy was announced in parliament, and Prommin underscored the government’s responsibility to implement it, reported Bangkok Post.

 

Surapong Suebwonglee, a national committee member on soft power development, defended the implementation of the digital currency giveaway in a Facebook post on Tuesday.

 

by Mitch Connor

Picture courtesy of Adam Dore, Unsplash

 

Full story: The Thaiger 2023-11-16

 

- Cigna offers a range of visa-compliant plans that meet the minimum requirement of medical treatment, including COVID-19, up to THB 3m. For more information on all expat health insurance plans click here.

 

Get our Daily Newsletter - Click HERE to subscribe

 

[bob smith]

12 minutes ago, webfact said:

The economy is in a dire state and in urgent need of a stimulus package to prevent further deterioration, according to the government.

straight from the horses mouth!

 

no matter what anyone tells you (usd) cash is still king, and when the economy does inevitably collapse I shall be there to take full advantage as I've got lots of it ;) 

[ozz1]

Just ask tat they say everything is fine with a squillion tourists but the problem is that the thai banks love lending money even if people can't afford it new car new phone etc

[Mike Lister]

Once again, with government debt at a low level of 60% of GDP and Foreign Currency Reserves of over USD 220 billion, that's three times the required minimum, Thailand's economy is nowhere near to collapse. Plus, the target of 27 mill. tourists looks like it will easily be reached, if anyone is waiting for a collapse, make sure you pack lots of sandwiches and have several good books.

[Mike Lister]

5 minutes ago, ozz1 said:

Just ask tat they say everything is fine with a squillion tourists but the problem is that the thai banks love lending money even if people can't afford it new car new phone etc

If GDP falls, which it has, and if lending remains flat and no new bank loans are made, statistically, the household debt ratio to GDP will increase, without anyone doing anything. By the same token, when the economy picks up and GDP rises, the newspapers will be full of how successful the revival has been and isn't the PM good, because the household debt to GDP ratio will fall.

[bamnutsak]

Sounds like the "government" realizes that this wallet scheme is dying a slow death, so they need to scaremonger about how dire the economic situation is in order to push the scheme.

 

Nice try, losers.

 

 

[Walker88]

I appreciate the public debt to GDP and the FX Reserves, but I also can see that Thailand's growth from 2010 to today was solely debt fueled. Household debt soared (not including loan shark debt), bank lending, too, and corporate bond issuance was at a staggering rate 5x that of the meager 1.8% per annum GDP growth.

 

Thailand faces a few hurdles today. They're not insurmountable, but it will take some clever policy wonks to navigate the next few years. I'm not sure the govt has the bench strength they need.

 

The world is awash in capacity. Thailand benefited from lots of FDI, but as production facilities age or are depreciated, neighboring countries like Vietnam beckon. Tourism is picking up, and what was 17.8% of the economy in 2019 is likely to pop 20% in 2023 when all is said and done. Hopefully that is sustainable, but the new tax issue may encourage some resident expats and snowbirds to look elsewhere. Though not tourism per se, it is foreign money, so somewhat similar.

 

I can't see where the Thai economy is going to excel, absent running up more public debt and utilizing the FX reserves.

 

Something which is completely in the dark (to me, at least) is the level of NPLs in the banks. I know that the official numbers are accessible, but I don't put much stock in them. During Covid two things happened: one was that there was a debt moratorium that lasted many months. The other is that I read banks were allowed to book imputed interest and run that through the income statement. Loans were booked as if the borrower was servicing the debt, when they were not in fact.

 

I worked the markets in Japan after the Dai Boroku and saw what banks were allowed to do. It was a stopgap measure that ultimately failed. Japan allowed imputed interest and had accounting rules that did not require subs that represented less than a certain amount of assets/revenue/etc. to be consolidated on the parent's BS. That led to hundreds of Caribbean subs that held losses. The worst offenders ultimately went belly up. Japan never really recovered. It's pension system is so bizarre in its accounting that I have to wonder what is actually in the coffers....and that as the population both falls and ages.

 

Thailand lacks the massive public debt to GDP Japan had/has (see the yen still above 150 despite rallies in all other major currencies against the $), but Japan stands as a reminder that there are limits to how much the govt can help the overall economy. Thailand is also well below replacement rate in terms of population.

[fondue zoo]

 

Truly start educating your populace, and stop 5 or 6 families using the country as their personal piggy bank.

 

 

 

......nah

 

 

[Mike Lister]

9 minutes ago, Walker88 said:

I appreciate the public debt to GDP and the FX Reserves, but I also can see that Thailand's growth from 2010 to today was solely debt fueled. Household debt soared (not including loan shark debt), bank lending, too, and corporate bond issuance was at a staggering rate 5x that of the meager 1.8% per annum GDP growth.

 

Thailand faces a few hurdles today. They're not insurmountable, but it will take some clever policy wonks to navigate the next few years. I'm not sure the govt has the bench strength they need.

 

The world is awash in capacity. Thailand benefited from lots of FDI, but as production facilities age or are depreciated, neighboring countries like Vietnam beckon. Tourism is picking up, and what was 17.8% of the economy in 2019 is likely to pop 20% in 2023 when all is said and done. Hopefully that is sustainable, but the new tax issue may encourage some resident expats and snowbirds to look elsewhere. Though not tourism per se, it is foreign money, so somewhat similar.

 

I can't see where the Thai economy is going to excel, absent running up more public debt and utilizing the FX reserves.

 

Something which is completely in the dark (to me, at least) is the level of NPLs in the banks. I know that the official numbers are accessible, but I don't put much stock in them. During Covid two things happened: one was that there was a debt moratorium that lasted many months. The other is that I read banks were allowed to book imputed interest and run that through the income statement. Loans were booked as if the borrower was servicing the debt, when they were not in fact.

 

I worked the markets in Japan after the Dai Boroku and saw what banks were allowed to do. It was a stopgap measure that ultimately failed. Japan allowed imputed interest and had accounting rules that did not require subs that represented less than a certain amount of assets/revenue/etc. to be consolidated on the parent's BS. That led to hundreds of Caribbean subs that held losses. The worst offenders ultimately went belly up. Japan never really recovered. It's pension system is so bizarre in its accounting that I have to wonder what is actually in the coffers....and that as the population both falls and ages.

 

Thailand lacks the massive public debt to GDP Japan had/has (see the yen still above 150 despite rallies in all other major currencies against the $), but Japan stands as a reminder that there are limits to how much the govt can help the overall economy. Thailand is also well below replacement rate in terms of population.

There are so many issues that it's difficult to know where to begin! One large problem is that only 22% of the workforce is engaged in manufacturing and producing goods for export whilst 48% are engaged in the Services sector, much of which is tourism oriented. In short, Thailand doesn't make enough stuff for export, its main export is the holiday experience which is a Services export.

 

Given that goods exports are so low, it's interesting that the BOT foreign currency reserves equal over 9 months of exports whereas only three are required. BOT accumulates these reserves by default but really doesn't have any use for them other than to guarantee trade and support the Baht. And the government can't get to those reserves, they don't don't belong to them and are not accessible. Given the huge build out of infrastructure that's taken place over the past ten years and which continues today, I get the idea that the desire is to increase goods exports and from the PM's travels to date, perhaps that's the plan.

 

As for NPL's, officially they stand at 3.4% of total book but Special Mention loans are up to over 6%.

 

 

 

 

[bob smith]

1 hour ago, Mike Lister said:

Once again, with government debt at a low level of 60% of GDP and Foreign Currency Reserves of over USD 220 billion, that's three times the required minimum, Thailand's economy is nowhere near to collapse. Plus, the target of 27 mill. tourists looks like it will easily be reached, if anyone is waiting for a collapse, make sure you pack lots of sandwiches and have several good books.

were you here in '97?

[Mike Lister]

On 11/16/2023 at 10:00 AM, bob smith said:

were you here in '97?

Yes, I lived in Hong Kong but worked here for 30% of the time from 93 through 98 when I moved here permanently. There is almost no economic comparison between the economy then and now, except perhaps that the levels of government debt are very very similar. In 1997, over 60% of the population was in poverty, today it's around 6%. Foreign currency reserves back then were miniscule by comparison plus they were poorly managed, today the BOT has a very firm grip on the financial sector institutions and the reserves. In 97. the piles were first being sunk on Sukhumvit for the sky train, today the rail network is mature and spans the entire capital and beyond. Road, rail and air infrastructure was in its infancy, today it's mature. Pre-97, Thai businesses were fledgling, today those businesses own overseas businesses in many sectors, department stores, football teams, hotel chains and construction companies. Need I continue?

[bob smith]

47 minutes ago, Mike Lister said:

Need I continue?

A load of waffle about a whole lot of nothing.

 

Keep talking if you want, Mike. I won't be listening though..

[Mike Lister]

1 minute ago, bob smith said:

A load of waffle about a whole lot of nothing.

 

Keep talking if you want, Mike. I won't be listening though..

You asked me a question, I answered, if you don't want to read my answers, don't ask me questions!

[bob smith]

6 minutes ago, Mike Lister said:

You asked me a question, I answered, if you don't want to read my answers, don't ask me questions!

shut up mike. nobody likes you.

[Mike Lister]

1 minute ago, bob smith said:

shut up mike. nobody likes you.

New forum, new day, let's start off right.......goodbye from view, Bob Smith.

[mokwit]

Is there not some way they could gauge foreigners to cover the shortfall?

[spidermike007]

I have a radical suggestion. Thailand could be making a fortune on a 25% luxury tax. Instead of the 100% or more, which discourages most people from buying. How many people do you see in the luxury stores here? They are almost always completely empty. Inane. Beyond inane.

Some regressive nimwits do not understand basic economics. By reducing taxes you stimulate the economy. In addition, if Thailand reduces its punitive wine taxes and luxury taxes, they might be able to attract more of those rich tourists they keep droning on and on and on about. The rich are smart with their money. And not only do they enjoy a nice bottle of wine with dinner, their wives also love to spend alot of money on luxury goods while they vacation. Impossible here. Who would buy a Prada handbag for $11,700 here, when you can get it for $4,800 in most world capitals? Same goes for wine. Who would spend $700 for a bottle of wine they could get for $125 at home.

It is referred to as self sabotage, or idiotic policy. An extreme lack of creativity forces retrograde politicians to become overly dependent on import taxes. Dumb and dumber. 

[daveAustin]

On 11/16/2023 at 8:47 AM, Mike Lister said:

Once again, with government debt at a low level of 60% of GDP and Foreign Currency Reserves of over USD 220 billion, that's three times the required minimum, Thailand's economy is nowhere near to collapse. Plus, the target of 27 mill. tourists looks like it will easily be reached, if anyone is waiting for a collapse, make sure you pack lots of sandwiches and have several good books.

 

You're right, it isn't. Might not be doing so great regionally, but look how much richer the place has been over the last 30 years or so... those others are bound to do a bit of comeback. The real people in power here want to make it look all rosy or doom 'n gloom based on their current agenda. Btw, the inbound tourist figure was always cooked. It will be nowhere near 27M. They tout every head coming in... I might visit and then bounce all across Asia popping in and out of the Venice of the East half a dozen times and apparently I'm six people! It is likely closer to 15M.

 

Anyway, good thread... some quality invective there from Mr 'Smith' et al. 

[Mavideol]

depreciate the baht as it was going into the right direction at 37-38 Bht o 1 USD but it went backwards and that doesn't help tourism and/or exports just helps a little the petrol price but.... decide on your priorities

[Dogmatix]

Fake news alert.  Reports have been circulating that the economy is in crisis and the government needs to borrow 3% of GDP to fix it.  Please ignore this fake news that is designed to instill panic and make people spend less and save more, which will in turn lead to a genuine crisis, if enough people believe the fake news.