Thailand’s debt drive: Putting the brakes on cars and homes

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The financial woes of Thailand have taken centre stage as crippling debt levels put the brakes on car sales and curb the housing market, particularly among low-income households. With banks wary of non-performing loans (NPLs), many hopeful borrowers are seeing their applications for mortgages and car loans hit the skids. In response, the government is steering new initiatives to tackle this economic roadblock.

 

The Finance Ministry, teaming up with the Bank of Thailand, the National Economic and Social Development Council, and the Thai Bankers’ Association, is revving up a plan to ease the debt load on beleaguered individual borrowers and SMEs.

 

The strategy? A clever debt restructuring scheme that puts a lid on interest payments while borrowers focus on repaying the principal. Meet the requirements, and the suspended interest might even get waved away as an added incentive to keep repayments on track, said Pornchai Thiraveja, the Fiscal Policy Office Director-General.

 

“This programme aims to support small borrowers who intend to reduce their debt and are expected to resume normal repayments once their incomes recover,”

The programme hopes to fix structural flaws by linking government and bank data, offering a clearer picture of debt loads and repayment capabilities. While finer details are still in the pipeline, the initiative is expected to cover borrowers with loan agreements signed before January 1, 2024, who’ve faced financial turbulence as of October 31, 2024.

 

Household debt currently stands at a hefty 89.6% of GDP, down slightly from earlier figures, prompting government action. Previous efforts included low-interest loans and debt suspensions for some state institution clients. Thitima Chucherd from SCB EIC noted that the interest suspension helps vulnerable borrowers tackle their debt head-on.

 

Debt relief

 

Targeting those grappling with mortgages, car, and small business loans, the new scheme draws input from crucial players in both private and public sectors, with plans to roll out early next year. By providing debt relief, the programme aims to cut down on repossessions, allowing borrowers to keep using their vehicles for work, said Suphan Mongkolsuthree, ex-chairman of the Federation of Thai Industries.

 

“Banks remain cautious due to NPLs. New solutions are needed for both lenders and borrowers.”

 

This debt burden has spilt over into the manufacturing domain, depressing car sales and scaling back 2024 car production targets. Issara Boonyoung from the Thai Chamber of Commerce points out that the temporary relief could help prevent vehicle repossessions, keeping people on the road for work.

 

While these measures won’t directly boost new home buying, they aim to cool economic pressures caused by mounting debt. SMEs particularly stand to benefit from the interest payment pause, helping them stay afloat and stave off layoffs, said Jesada Techahusdin, an analyst at Maybank Securities.

 

“While the new debt relief measure could reduce sector NPLs, measures to increase household income are necessary for long-term solutions,”

 

This initiative paves the way for deflating Thailand’s towering debt problem, with more strategies likely to follow to boost household incomes. The hope? A financial turnaround hitting top gear.

 

by Bob Scott Bob
Picture courtesy of Invest Asian

 

Source: The Thaiger 

-- 2024-11-18

 

 

[ikke1959]

Does Thailand really think that people with a daily wage of less than 400 THB a day and with 20 holidays a year can buy a house or car?? Or from 1 time 10k handout??? That is 30 THB a day in 365 days....And who can buy?? the rich and superrich and the people who have a government job or are in big business.. although I am wondering how young boys can afford a BMW or even a Mercedes or other big cars...They don't have a normal job as I see them the whole week everywhere on every day... I think I did something wrong in my life

[lordgrinz]

Almost everyone you meet here is in debt that would make most of us foreigners want to commit suicide, they have almost no way of paying back the debts they have racked-up, let alone add new debt. I mean is there even a check against peoples ability to repay debt here? 

[OneMoreFarang]

Nobody should not give credit to people who will likely not be able to pay the money back.

At the end, this would be good for everybody, including those people.

 

It seems too many bank and loan sharks try to make money from people who can't pay back what they borrowed. That is a very sad business model. 

[edwinchester]

Banks have crazy lending criteria.

Wifey and I bought a car recently. Wanted a loan as I can get better interest on my capital as the loan rate. Turned down despite income of nearly 100k per month so paid cash.

Wifeys friend was granted a loan for a new pickup. Repayments 7k per month with an income of 9k per month. Madness. Friends mum is now scrabbling around every month borrowing money to pay the loan for the family car.

[Lopburikid]

1 hour ago, ikke1959 said:

Does Thailand really think that people with a daily wage of less than 400 THB a day and with 20 holidays a year can buy a house or car?? Or from 1 time 10k handout??? That is 30 THB a day in 365 days....And who can buy?? the rich and superrich and the people who have a government job or are in big business.. although I am wondering how young boys can afford a BMW or even a Mercedes or other big cars...They don't have a normal job as I see them the whole week everywhere on every day... I think I did something wrong in my life

Mybe Mummy and Daddy buy them the BMW and Mercs

[phetphet]

Just before Covid, every Thai seemed to be buying a brand new pick up truck. Mostly with a loan. Even then I think many were repossessed. I'm not surprised that the bank's are tightening up on lending money. They must have a whole heap of homes and used vehicles on their books.

[Peterphuket]

2 hours ago, ikke1959 said:

Does Thailand really think that people with a daily wage of less than 400 THB a day and with 20 holidays a year can buy a house or car?? Or from 1 time 10k handout??? That is 30 THB a day in 365 days....And who can buy?? the rich and superrich and the people who have a government job or are in big business.. although I am wondering how young boys can afford a BMW or even a Mercedes or other big cars...They don't have a normal job as I see them the whole week everywhere on every day... I think I did something wrong in my life

'although I am wondering how young boys can afford a BMW or even a Mercedes or other big cars...They don't have a normal job'

 

Let me guess, perhaps you could ask the same question regarding the country you come from.

[ChaiyaTH]

1 hour ago, edwinchester said:

Banks have crazy lending criteria.

Wifey and I bought a car recently. Wanted a loan as I can get better interest on my capital as the loan rate. Turned down despite income of nearly 100k per month so paid cash.

Wifeys friend was granted a loan for a new pickup. Repayments 7k per month with an income of 9k per month. Madness. Friends mum is now scrabbling around every month borrowing money to pay the loan for the family car.

Their solution is to use the car to start driving as a Grab driver. Not realizing at all, that the car this way will need a lot of maintenance in general aside from eventually being at it's end due to mileage, this while the loan then still lasts 15 years more. Same for houses, loans are 25-30 years while the builds last barely 20 years and the land was bought overvalued in the first place. It's a never ending debt trap.

All their logic seems to do is: the car has no scratches and inside is like brand new, so the value is the same as when I bought it. Or another common logic applied is that they sell it second hand for the value + interest they paid so far.

 

You can already see the market being flooded with very cheap cars as their mileage is on the moon. I remember when I moved here around 12 years ago, a second hand would cost a few hundred K at least, now 30-50k.

 

But for all this is a solution already in place too; they go bankrupt and then they drive on their grandparents ID with grab, i always see these old people pictures while a young guy arrives lol. It's that normal nobody even mentions it.

 

All this also explain why it often seems as if Thais have money trees. They don't and it ends bad.

 

As far my calculations goes, it is only interesting if you can pay off within 5-7 years in Thailand. I stopped volunteering as all this is ignored while all volunteering is about giving the poor a fish. It's hypocrisy at the max.

Edited 19 minutes ago by ChaiyaTH

[ChaiyaTH]

Also the same with all the easy loans on properties and mainly condo's, the same milking machine, Thais all bought to then rent them out for double or to simply not pay back except for the interest and see the difference as additional income. Bubble: *POP*

[ikke1959]

36 minutes ago, Peterphuket said:

'although I am wondering how young boys can afford a BMW or even a Mercedes or other big cars...They don't have a normal job'

 

Let me guess, perhaps you could ask the same question regarding the country you come from.

In my country they work and don't show of in their big cars.. Happily they are not Thai