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Thailand caught in a cycle of low GDP growth and high household debt


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Thailand’s household debt remains worryingly high at almost 91 per cent of gross domestic product (GDP) as of the third quarter of last year, due largely to a debt overhang since COVID-19 hit the country in 2020.  Corporate debt was almost as high at 87.4 per cent of GDP in the same period, given the rising number of firms making low profit.

 

Piti Disyatat, secretary of the central bank’s Monetary Policy Committee (MPC), argues that a policy rate cut will not help much as around 40 per cent of household debt, such as mortgage loans, have a fixed interest rate, while half of business loans also have a fixed rate.

 

A lower rate of interest could encourage people to take on more debt, adding to a cumulative debt burden later, he said.

 

Full story: Thai PBS 2024-02-22

 

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Many people are in such debt that it doesn't matter how much the government and banks tinker with things, they're never going to get out from under what they owe.  Need something drastic like lopping off a zero or two from the amount each person owes.

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2 hours ago, spidermike007 said:

When Prayuth the numskull shut down the economy due to covid, and absolutely gutted tourism, and nearly killed the industry, I said it was going to take many years for the Thai economy to recover. My friends were laughing and saying no, no, no, it'll happen quickly. I said no I don't think so.

 

I think we're still seeing the aftermath of the absolute slaughter of the Thai economy by Prayuth, the army, and his idiotic cronies and this could take some time. The tourism numbers are not quite as high as they say they are, and the quality of tourists has dropped dramatically. 

 

Of course there are other factors, the economy is slowing down worldwide, and we may yet see a rather significant recession or correction. But the army destruction and decimation did not help, and having a completely incompetent cabinet in place right now does not help either. Think about it Sretta is not only PM, but he's also been appointed finance minister. How on earth do they think a guy like him could run the economy? And isn't the economy important enough to warrant somebody who concentrates solely on running the economy? And why is the tourism minister also the sports minister?

 

Does anybody have answers to any of these questions? 

Not really, but I have a couple of observations.

 

The first is that it's perhaps helpful to move on from the military years and start looking forward rather than backwards, I know it's nice to have somebody to blame, but!!

 

Secondly is that Thailand is an export led economy, over 63% of GDP is achieved via exports of goods and services. What that means is that the Thai economy is at the mercy of the buyers and if they aint buying, Thailand aint selling and GDP growth is going to suffer.

 

Thirdly, as far as I can see, the PM wants to undermine the credibility of BOT and cause the Baht to sink and FDI to ride away into the sunset. He further wants to go ahead with the giveaway program which will also be highly baht negative. Exactly why he wants those things is a real mystery, but since he does, not having a Finance Minister is probably useful!

 

 

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3 hours ago, Mike Lister said:

Misleading:

 

In 2019, Thailand's GDP was USD 544 bill. and consumer lending (household debt) was 83% or 452 bill.

 

Today, Thailand's GDP is USD 510 bill. and consumer lending is 91% or 464 bill.

 

If Thailand's GDP returned to 2019 levels tomorrow, consumer lending would be 84%

 

The reality is that  todays household debt numbers, whilst poor, are not very different to what they were five years ago.

 

https://tradingeconomics.com/thailand/gdp

https://tradingeconomics.com/thailand/households-debt-to-gdp

 

 

What do you not understand that you would like explained further @Celsius ?

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How can there be growth if the main source of cash is compromised ? Prices have highly increased on many services. People are openly cheating the main big spenders in Thailand, that is the retirees-expats. (not the 2 week tourists). Consequently,  these wealthy people do not spend their money on services and goods with retailers in  Thailand any more and online shopping that often quotes half the prices are used instead.

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Thailand won't die on the scale of China IMHO. But, the communist party that rules Thailand (or Military rule) has gone full on with China. So, if China keeps falling Thailand will follow at a slower rate. Problem is the western expats that bought into retiring in Thailand will be hit with ever increasing hardships, and anti western sentiment. Unfortunately for the expats in Thailand the world is changing. And, they got caught up in the rapid change in SE Asia. 5-10 years at best before the bottom drops out completely for expats.

This started several years ago and, it has and will get worse very fast now. Smart money got out of Thailand a few years ago. Now, too late for most.  

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3 hours ago, spidermike007 said:

When Prayuth the numskull shut down the economy due to covid, and absolutely gutted tourism, and nearly killed the industry, I said it was going to take many years for the Thai economy to recover. My friends were laughing and saying no, no, no, it'll happen quickly. I said no I don't think so.

 

I think we're still seeing the aftermath of the absolute slaughter of the Thai economy by Prayuth, the army, and his idiotic cronies and this could take some time. The tourism numbers are not quite as high as they say they are, and the quality of tourists has dropped dramatically. 

 

Of course there are other factors, the economy is slowing down worldwide, and we may yet see a rather significant recession or correction. But the army destruction and decimation did not help, and having a completely incompetent cabinet in place right now does not help either. Think about it Sretta is not only PM, but he's also been appointed finance minister. How on earth do they think a guy like him could run the economy? And isn't the economy important enough to warrant somebody who concentrates solely on running the economy? And why is the tourism minister also the sports minister?

 

Does anybody have answers to any of these questions? 

 

well, yes and no, most people weren't going anywhere on holiday during covid - not even in their own countries, thailand was not alone in that. though thailand was slow in coming out of covid and tourist arrivals were behind the worldwide tourism recovery curve. tourist numbers are improving but as tourism is only around 18% of GDP it's a mistake to focus too much on that sector. as i see it the main issues with the thai economy are low productivity, the rapidly ageing population and rampant endemic corruption none of which are quickly fixed. but thialand is not alone most countries are currently suffering economic woes.

 

 

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1 hour ago, Mike Lister said:

What do you not understand that you would like explained further @Celsius ?

 

"If Thailand's GDP returned to 2019 levels tomorrow, consumer lending would be 84%"

 

This being incorrect.

 

Also good thing to know that mods can see who leaves the emojis

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1 hour ago, Celsius said:

 

"If Thailand's GDP returned to 2019 levels tomorrow, consumer lending would be 84%"

 

This being incorrect.

 

Also good thing to know that mods can see who leaves the emojis

It's simple maths, the more GDP falls, the higher the percentage of debt is. 

If today, as per the article, the debt is 91%, that means debt equals 464 bill. Now take 464 bill as a percentage of the 2019 GDP and it falls back to 84%.

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You can't reduce poverty by lending money to poor people who are already steeped in debt and don't have a business plan. But you can reduce poverty and high risk loans to the poor through better education, reskilling, higher quality products, lower levels of corruption and creating a healthier more competitive economic environment. Open up Thai borders to outside competition, that'll make Thai companies up their game and make them more competitive and make business more sustainable and grow.

 

For interest sake, poverty reduction graph in Thailand since the mid 1980's. That reduction took place because tourism increased, exports increased and GDP increased:

 

Screenshot(35).png.ee1073d6fadec18e62730ee01313b664.png

 

 

https://blogs.worldbank.org/eastasiapacific/reducing-poverty-and-improving-equity-thailand-why-it-still-matters

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13 hours ago, spidermike007 said:

When Prayuth the numskull shut down the economy due to covid, and absolutely gutted tourism, and nearly killed the industry, I said it was going to take many years for the Thai economy to recover. My friends were laughing and saying no, no, no, it'll happen quickly. I said no I don't think so.

 

I think we're still seeing the aftermath of the absolute slaughter of the Thai economy by Prayuth, the army, and his idiotic cronies and this could take some time. The tourism numbers are not quite as high as they say they are, and the quality of tourists has dropped dramatically. 

 

Of course there are other factors, the economy is slowing down worldwide, and we may yet see a rather significant recession or correction. But the army destruction and decimation did not help, and having a completely incompetent cabinet in place right now does not help either. Think about it Sretta is not only PM, but he's also been appointed finance minister. How on earth do they think a guy like him could run the economy? And isn't the economy important enough to warrant somebody who concentrates solely on running the economy? And why is the tourism minister also the sports minister?

 

Does anybody have answers to any of these questions? 

100% agree. Prayut turned Thailand into a low GDP growth country with significantly higher government debt/GDP ratio. I think the rot set in well before his disastrous COVID management, although the 2008 finical crisis will have distorted some of the per-coup numbers. But basically, I think,  junta's don't run economies very well. 

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9 hours ago, Sigmund said:

How can there be growth if the main source of cash is compromised ? Prices have highly increased on many services. People are openly cheating the main big spenders in Thailand, that is the retirees-expats. (not the 2 week tourists). Consequently,  these wealthy people do not spend their money on services and goods with retailers in  Thailand any more and online shopping that often quotes half the prices are used instead.

Nonsense, you think far too highly of the role played by expats in Thailand!

 

Thailand is an export led eco0nomy, over 60% of GDP is derived from the export of goods and services and totals over USD 320 bill per year. The 300,000 or so Westerners living in Thailand account for less than USD 10 bill per year.

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5 minutes ago, retarius said:

100% agree. Prayut turned Thailand into a low GDP growth country with significantly higher government debt/GDP ratio. I think the rot set in well before his disastrous COVID management, although the 2008 finical crisis will have distorted some of the per-coup numbers. But basically, I think,  junta's don't run economies very well. 

The facts speak differently. Prayut was in office from 2014 until 2023. The economy didn't start off well in the early years but did well thereafter, until covid came along. Interestingly, 2014 thru 2016 was when the Thai economy performed poorly and this corresponds with the start of the USD strengthening period.Screenshot(37).png.e110c1c8a8d159cf2a7a797c50f86fb2.png

 

https://tradingeconomics.com/thailand/gdp

https://www.marketwatch.com/investing/index/dxy

 

Screenshot(36).png.433a4d0bd6e13c486be6ba2b1a2f811e.png

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This professor of economics sums things up nicely......read all of his articles from 14th December onwards.

Not looking good for Thailand....but good for our exchange rates.....let's see what happens in May.

REMOVED LINK TO BANGKOK POST

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1 minute ago, Suua said:

This professor of economics sums things up nicely......read all of his articles from 14th December onwards.

Not looking good for Thailand....but good for our exchange rates.....let's see what happens in May.

REMOVED LINK TO BANGKOK POST

I've removed a link to the Bangkok Post, posting such links is very much against forum rules, please read them below:

 

https://aseannow.com/forum_rules/

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1 hour ago, Mike Lister said:

The facts speak differently. Prayut was in office from 2014 until 2023. The economy didn't start off well in the early years but did well thereafter, until covid came along. Interestingly, 2014 thru 2016 was when the Thai economy performed poorly and this corresponds with the start of the USD strengthening period.Screenshot(37).png.e110c1c8a8d159cf2a7a797c50f86fb2.png

 

https://tradingeconomics.com/thailand/gdp

https://www.marketwatch.com/investing/index/dxy

 

Screenshot(36).png.433a4d0bd6e13c486be6ba2b1a2f811e.png

I can't believe you seem to think Prayut did well? I see Prayut had 3 years of growth 2017 to 2019 after 3 years of flatlining.  We then have tiny fluctuations for the past 4 years, basically flatlining.....3 decent growth years out of 10 at the helm is a pretty miserable performance, in my book. He mismanaged the COVID response so these past 4 years lie at his door. Yingluck had 3 good growth years out of 3. 

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28 minutes ago, retarius said:

I can't believe you seem to think Prayut did well? I see Prayut had 3 years of growth 2017 to 2019 after 3 years of flatlining.  We then have tiny fluctuations for the past 4 years, basically flatlining.....3 decent growth years out of 10 at the helm is a pretty miserable performance, in my book. He mismanaged the COVID response so these past 4 years lie at his door. Yingluck had 3 good growth years out of 3. 

You have to compare apples and apples! Prayut first governed from 22 May 2014 to 10 July 2019, a 5 year period that encompassed 6 budget years, three of which were good, two of which were poor and the last one being mediocre. Whether or not he was personal responsible for the poor performance of the first year is debatable since he took power mid year, he has to take responsibility for the second year however. I'm going to score that as 3.5 out of 5.

 

The covid response period is tricky, there are pluses and minuses. As the DI graph above shows, Dollar strength was a major factor and Thailand is an export led economy. On the plus side, interest rates were kept low and borrowings remined under control plus he did protect the population by closing the country. An over reaction? Dunno, it depends on your priorities. On the downside he didn't recover the economy as well as other countries but I come back to unusual USD strength and exports, especially to China.

 

I'm no fan of military governments but we should be fair and balanced about our criticism and not allow circumstance to distort the picture. My best guess is that Yingluk got lucky rather than anything else, she spent lots of money on giveaways to the people which spurred consumer consumption. There is a wonderful graphic in the Bangkok Post dated 27 July 2023 entitled  Reviving Thai Economy is a Tall , Order, please take a look. The graphic compares various economic factors at the start of each term of office for the various PM's. The huge thing that hits you immediately is that Yingluk started office with a massive amount of excess liquidity (823 bill) which she duly spent by generating consumer consumption, that was the main stay of her economic achievements. By the time Prayut took over, excess liquidity was negative (-73 bill) hence he was hamstrung for the first 18 months. In short, Yingluk spent all the savings on the people and did nothing for exports and left no money for the next administration. 

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16 hours ago, John Drake said:

Many people are in such debt that it doesn't matter how much the government and banks tinker with things, they're never going to get out from under what they owe.  Need something drastic like lopping off a zero or two from the amount each person owes.

It wouldnt matter  if  you zeroed  their debt, within a  short  time theyd  be  back in debt, due to their own stupidity, live within your means whether it be a mansion or a  jungle  shack or neither.

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4 hours ago, hotchilli said:

And then what happens to the lender... ?

I dont know for certain what will happen to lenders in the near future, but its a fair bet to guess many are going to see their profits take a massive tumble if the mount of NPL that has been publicized and more importantly the amount of " special mention Loans " that have also been made public all turn toxic

The amounts are eye watering

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14 hours ago, Mike Lister said:

Not really, but I have a couple of observations.

 

The first is that it's perhaps helpful to move on from the military years and start looking forward rather than backwards, I know it's nice to have somebody to blame, but!!

 

Secondly is that Thailand is an export led economy, over 63% of GDP is achieved via exports of goods and services. What that means is that the Thai economy is at the mercy of the buyers and if they aint buying, Thailand aint selling and GDP growth is going to suffer.

 

Thirdly, as far as I can see, the PM wants to undermine the credibility of BOT and cause the Baht to sink and FDI to ride away into the sunset. He further wants to go ahead with the giveaway program which will also be highly baht negative. Exactly why he wants those things is a real mystery, but since he does, not having a Finance Minister is probably useful!

 

 

Thailand has a finance minister but it happens to also be the PM. It's very difficult to move on from the army years when the army is still essentially in control. The PT capitulated and allow the toxic army to be part of the administration and none of us have any idea how much control they're exerting.  One can only guess it is quite significant so the army days are not over, they continue. This is the 10th year of army rule. 

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4 hours ago, Mike Lister said:

Nonsense, you think far too highly of the role played by expats in Thailand!

 

Thailand is an export led eco0nomy, over 60% of GDP is derived from the export of goods and services and totals over USD 320 bill per year. The 300,000 or so Westerners living in Thailand account for less than USD 10 bill per year.

I've often wondered about how many expats live in Thailand and it's very difficult to get these numbers. Do you have an accurate source for that 300,000, or is that an estimate? 

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4 hours ago, Mike Lister said:

Thailand is an export led eco0nomy, over 60% of GDP is derived from the export of goods and services and totals over USD 320 bill per year. The 300,000 or so Westerners living in Thailand account for less than USD 10 bill per year.

I would be interested to know where you get the figures of 300,000 westerners residing in Thailand.   

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5 minutes ago, Raindancer said:

I would be interested to know where you get the figures of 300,000 westerners residing in Thailand.   

It's just the latest of a series of estimates that have been quoted lately but very much on the high end.

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