Less populist policies would cut household debt: Asian Development Bank (ADB)

[webfact]

Less populist policies would cut household debt: ADB
Erich Parpart
The Nation



Bank says govt could boost purchasing power for people by smarter policies

BANGKOK: -- The Asian Development Bank (ADB) has suggested that once Thailand has a permanent government in place, it should drop its populist policies as a way to rein in rising household debt.

Luxmon Attapich, ADB senior country economist, said the high level of household debt last year had lowered people's purchasing ability, and this situation had continued into this year at the same time as reduced income as the slump in the economy had affected consumers' ability to repay their debts.

She said a short-term solution to increase people's ability to repay their loans was for the economy to pick up, but there were also long-term solutions such as the promotion of a money-saving culture and discouraging people from taking out superfluous loans.

She also suggested that the new government adopt fewer populist policies that have the effect of eventually raising personal debt and for financial institutions to moderate the use of campaigns that lure customers into borrowing for impractical reasons.

The Bank of Thailand reported that at the end of last year, household debt stood at Bt9.79 trillion, or 82 per cent of gross domestic product. This compared with just 55.8 per cent of GDP at the end of 2008.

And the debt-to-GDP ratio has continued growing according to Kasikorn Research Centre, which estimates it will rise to 84 per cent by the end of 2014.

The World Bank's "Thailand Economic Monitor" reported last month that the high level of household debt was one of the factors constraining Thai consumers' purchasing power last year.

However, BOT spokeswoman Dr Roong Mallikamas said it was hard to quantify how much high household debt had contributed to the current slowdown of domestic consumption because there were other factors in play such as reduced income.

She noted that most households were still able to make their loan payments normally. The number of special-mention and non-performing loans (NPLs) at commercial banks had risen by only a small margin, from 5.4 per cent in the third quarter to 5.7 per cent in the fourth quarter of 2013.

Roong said the problem was the reduced cashflow within the household. When this is coupled with the already high level of debt, people have started to try to stabilise their financial situation, and this contributed to the slowdown in domestic consumption.

"The high level of household debt is a factor that has contributed to the current slowdown of domestic consumption, but the size of its effect cannot be identified," she said.

Still, the BOT has been warning about high household debt since last year, and the problem appears to be continuing.

Somchai Amornthum, executive vice president of the research department at Krung Thai Asset Management, said the current rise in household debt was a short-term phenomenon that would slow down once the economy recovers from the political turmoil.

He said commercial banks were well aware of the situation and rises in NPL rates in recent years were still manageable and not an immediate concern.

"The number of NPLs is on the rise this year but it should not be a problem for commercial banks since it was expected, and the banks' financial strength has remained high. There is no NPL crisis at this time," he said.

Somchai said commercial banks had been warned by the BOT since last year to be wary of rising household debt and they had taken some measures such as tightening loan requirements. Other measures such as active loan-collection strategies and a reduction of promotional campaigns to encourage borrowing have also been taken by commercial banks to lessen the chances of NPLs.

He said the BOT had done a good job in getting out the message to loan providers and consumers, which has reduced the risks considerably. He also believes that when the economy improves and the political squabble has died down, the consequent increase in both domestic consumption and government spending should be enough to counter the effects of rising household debt.


-- The Nation 2014-04-21

[Thai at Heart]

Which specific policy is this?

Houses? Cars? Credit cards? They did stimulate cars, but which populist policy boosted housing?

[WoopyDoo]

Which specific policy is this?

Houses? Cars? Credit cards? They did stimulate cars, but which populist policy boosted housing?

Many rice farmers were conned into taking out large mortgages and built bigger and more modern housing, or moved into shiny new houses all on the pretext that the rice scheme was gonna pay.

They were dreaming to believe anything connected with Thaksin.

If all of a sudden your rice was no longer worth 8000 baht a tonne, but actually almost doubled to 15,000 a tonne.... I suppose we all would be looking at a new house and a new car (with a nice discount) on credit.

Unfortunately for them, they failed to understand that once the votes were 'in the bank'...... The actual plan was to steal as much of the money from these schemes for themselves... when the new elections come around again, they just need to throw the idiots another bone and get their votes again.

Edited April 21, 2014 by WoopyDoo

[WoopyDoo]

You can see from that chart that the Dems had it all controlled ( a proper government made up from proper politicians).

Apart from 2010 where GDP growth was subdued thanks to the reds burning and looting the capital.

As soon as the PTP come along, they household debt jumps up on a wave of artificial confidence. With GDP actually looking like it could recess this year, that figure may well leap to the mid 90s.

God forbid there will be another term of PTP governance... in 2 more years under them, it could be around 110% and that puts Thailand into austerity.

Welcome to Thaksin's Thailand... a bankrupt nation filled with bankrupt people.

[Tatsujin]

Short term thinking . . . as always . . .

[CaptHaddock]

You can see from that chart that the Dems had it all controlled ( a proper government made up from proper politicians).

Ah yes, the Democrat party, the party which hasn't won an election in a generation, but nevertheless gets power by military and judicial coups that trample the voting rights of the majority. That "proper" goverment.

[gabruce]

Which specific policy is this?

Houses? Cars? Credit cards? They did stimulate cars, but which populist policy boosted housing?

Many rice farmers were conned into taking out large mortgages and built bigger and more modern housing, or moved into shiny new houses all on the pretext that the rice scheme was gonna pay.

They were dreaming to believe anything connected with Thaksin.

If all of a sudden your rice was no longer worth 8000 baht a tonne, but actually almost doubled to 15,000 a tonne.... I suppose we all would be looking at a new house and a new car (with a nice discount) on credit.

Unfortunately for them, they failed to understand that once the votes were 'in the bank'...... The actual plan was to steal as much of the money from these schemes for themselves... when the new elections come around again, they just need to throw the idiots another bone and get their votes again.

and now the "Rice Bubble" has crashed and their rice will be worth less than when the program started. So hard times until another subsidy program takes it's place OR the surplus rice is gone and the market stabilizes. Market forces are already at work - some farmers will be switching from rice to other crops, others won't work so hard and only have 1 crop, others might start selling direct (as Buddha Issarra is promoting). There will also be others who will rent more land and grow more rice trusting the PTP to become the next government and to re-institute the same rice plan. They will either be surprised or not.

[lostinsurin]

It's the banks themselves that OK the loans for buying houses and I don't see many rice farmers living

in them, most are being bought by the Thai-Chinese business people.

And the property development is in the towns and cities not the villages.

So try not to blame everything on Thaksin and the rice scheme.

This has all happened in the west on several occasions.

[trainman34014]

Put these figures in front of Yingluck and the Ice Cream Gang and see if they care !

[SheungWan]

You can see from that chart that the Dems had it all controlled ( a proper government made up from proper politicians).

Ah yes, the Democrat party, the party which hasn't won an election in a generation, but nevertheless gets power by military and judicial coups that trample the voting rights of the majority. That "proper" goverment.

Ah yes, as opposed to a Government which illegally takes orders from a wanted criminal, lies that it isn't doing so and fails to implement populist policies without falling over its own shoelaces devoting its energies to sneaking back said Thaksin. That 'proper' government presumably.

[SICHONSTEVE]

Which specific policy is this?

Houses? Cars? Credit cards? They did stimulate cars, but which populist policy boosted housing?

There was a similar policy to the first time car buyers in that you could claim up to a half a million baht in tax deductions from buying you're first home or a deduction of 10% of the houses worth!!

I wonder what kind of percentage of reclaimed homes there is now from people out of their depth with debts?

[Thaddeus]

You can see from that chart that the Dems had it all controlled ( a proper government made up from proper politicians).

Ah yes, the Democrat party, the party which hasn't won an election in a generation, but nevertheless gets power by military and judicial coups that trample the voting rights of the majority. That "proper" goverment.

You may be wise to take a good look at the results instead of the methods.

[xminator]

Listening to banks and other such credit institutions is dangerous. They only care about the bottom line. The people that get hurt or suffer on the way to that bottom line is of no consequence.

[xminator]

You can see from that chart that the Dems had it all controlled ( a proper government made up from proper politicians).

Ah yes, the Democrat party, the party which hasn't won an election in a generation, but nevertheless gets power by military and judicial coups that trample the voting rights of the majority. That "proper" goverment.

You may be wise to take a good look at the results instead of the methods.

What results are you refering to? Sutheps bank accounts?

[Thai at Heart]

Which specific policy is this?

Houses? Cars? Credit cards? They did stimulate cars, but which populist policy boosted housing?

Many rice farmers were conned into taking out large mortgages and built bigger and more modern housing, or moved into shiny new houses all on the pretext that the rice scheme was gonna pay.

They were dreaming to believe anything connected with Thaksin.

If all of a sudden your rice was no longer worth 8000 baht a tonne, but actually almost doubled to 15,000 a tonne.... I suppose we all would be looking at a new house and a new car (with a nice discount) on credit.

Unfortunately for them, they failed to understand that once the votes were 'in the bank'...... The actual plan was to steal as much of the money from these schemes for themselves... when the new elections come around again, they just need to throw the idiots another bone and get their votes again.

Conned by who?

Banks? So what has that got to do with government policies? Pretty dumb banks to lend on the back of those policies.

[Thaddeus]

You can see from that chart that the Dems had it all controlled ( a proper government made up from proper politicians).

Ah yes, the Democrat party, the party which hasn't won an election in a generation, but nevertheless gets power by military and judicial coups that trample the voting rights of the majority. That "proper" goverment.

You may be wise to take a good look at the results instead of the methods.

What results are you refering to? Sutheps bank accounts?

Nope.

And if I need to explain, which I'm sure I don't, I doubt you would agree anyway.

[khunken]

No reference to the amount of household debt owed to loan sharks. I'm sure some of the unpaid rice farmers are up to their necks in debts.

I have no problem with populist policies provided they are targeted at those in most need. Neither the rice subsidy, first car subsidy or tablet subsidy were designed to help the poor and most needful.

The rice subsidy was specifically designed to (i) get votes and (ii) put money in the pockets of rice millers and landlords of poor farmers. Those growing rice for their own consumption were totally omitted.

The first car scheme was purely to compensate the Japanese can assemblers who suffered during the mismanaged 2012 floods.

The tablet scheme (what a mess that's been) was an attempt to be seen to be doing something to improve education when there are far more fundamental problems that need addressing with the Thai education system.

This is a problem when a party has one dictatorial criminal deciding and 'designing' populist schemes with only self-serving aims as a result.

Edited April 21, 2014 by khunken

[NeverSure]

Which specific policy is this?

Houses? Cars? Credit cards? They did stimulate cars, but which populist policy boosted housing?

I don't know the details, but there is a "new house scheme" for government employees. I know a teacher in Sisaket Province who just bought a new house on that scheme. By working numbers with the builder, she didn't have to put anything down.

She also has a new pickup on that scheme, a smartphone and of course helps her parents.

She makes 30K pm with her master's degree and some kind of administrative position but still is squeezed for money. She can't afford to buy furniture for the house.

So maybe she's "Exhibit A" for the OP.

[billd766]

You can see from that chart that the Dems had it all controlled ( a proper government made up from proper politicians).

Ah yes, the Democrat party, the party which hasn't won an election in a generation, but nevertheless gets power by military and judicial coups that trample the voting rights of the majority. That "proper" goverment.

You may be wise to take a good look at the results instead of the methods.

What results are you refering to? Sutheps bank accounts?

Why not look at Thaksins bank accounts as well.

I heard on the forum they have gone up by 450%. That has beaten the inflation rate easily.