Last year’s household debts amount to 85% of GDP

[Mr Somtam]

Thailand never ceases to baffle me, as all perceived economic theory and wisdom seems to go out of the window in this corner of the world.

Same here. Uncle makes small money, gets new hilux vigo, borrowing money to pay instalments. Never pays anyting back, mai pen rai [emoji202]

[Mr Somtam]

Why do they lend people with no steady income such big money? A new vigo is about a million baht!

[iancnx]

Why do they lend people with no steady income such big money? A new vigo is about a million baht!

If he has guaranteed the loan with a chanot, then the banks will be very happy to lend. It is when the banks start calling in the defaulters en-mass, it will all get very very messy if it leads to homelessness.

[kareona]

Of course some people rake up debts to satisfy their desire for luxury goods but most debts are just necessary to survive in a struggling economy. I see most debts coming from paying for a funeral, sickness or a wedding, school fees, agricultural implements, necessary repairs and so on.

[Asiantravel]

This large amount of " household debt ", which is transparent debt, is just a part of the problem. There is probably just as much debt in the " Black Banking Sector ", through loan sharks, Illegal banks, Etc.

Many, many people in Thailand do not have credit scores the same as in the developed world, because thier earnings are insufficient for credit cards / loans through the mainstream banks.

As a first resort to borrow the money for houses, cars, and other lifestyle purchases, these people resort to the " Black Banking Sector " to obtain money, with very little realistic means of being able to repay.

The BOT, has already expressed much concern over the amount of household debt being restrictive on any action they are able to take to stimulate the economy, such as devalueing the baht. And for sure the mainstream banks will be holding massive amounts of " Toxic " debt from Developers, Exporters Etc, who have seen their market bomb over the last 2 years.

1997 again ? time will tell on that one.

When it blows we may have a similar situation in terms of effect on the baht, and probably interest rates, but the reasons for any crisis may well be restricted (largely) to Thailand as I sense the rest of East Asia may well be ahead of the curve in terms of lessons learnt. How and to what extent the (desperate) working class Thai responds is the issue long term Farangs will wish to analyse. I suspect the Chinese are ready waiting in the wings.

" reasons for any crisis may well be restricted (largely) to Thailand "

Incorrect!

" Seven years after the bursting of a global credit bubble resulted in the worst financial crisis since the Great Depression, debt continues to grow. In fact, rather than reducing indebtedness, or deleveraging, all major economies today have higher levels of borrowing relative to GDP than they did in 2007. Global debt in these years has grown by $57 trillion, raising the ratio of debt to GDP by 17 percentage points (Exhibit 1). That poses new risks to financial stability and may undermine global economic growth."

Debt-to-GDP ratios have risen in all 22 advanced economies in the sample, by more than 50 percentage points in many cases (Exhibit 2).

http://www.mckinsey.com/insights/economic_studies/debt_and_not_much_deleveraging

This phenomenon is happening everywhere

South Korean households pile up debt

http://www.ft.com/intl/cms/s/0/ed974c7a-8fe8-11e4-a0e5-00144feabdc0.html#axzz3ScroPZQB

Edited February 24, 2015 by Asiantravel

[trogers]

Why do they lend people with no steady income such big money? A new vigo is about a million baht!

If he has guaranteed the loan with a chanot, then the banks will be very happy to lend. It is when the banks start calling in the defaulters en-mass, it will all get very very messy if it leads to homelessness.

Just wait for the next election and vote in the party who promises to bail them out. This is called 'slavery through debt' and is used effectively in the Americas.

[trogers]

Of course some people rake up debts to satisfy their desire for luxury goods but most debts are just necessary to survive in a struggling economy. I see most debts coming from paying for a funeral, sickness or a wedding, school fees, agricultural implements, necessary repairs and so on.

Yes, shotgun weddings and buying votes for local elections.

[thhMan]

Its still amazes me how I am looked down by some Thais, when I am driving my second hand clunker, all paid for...

In the soi I live in, there are some trashy, garbage ridden houses with new cars parked in them...

Sad that lives are being lived difficult, just for the sake of "looking" good till the repo man comes knocking!

Edited February 24, 2015 by thhMan

[wabothai]

When you have them all in debthed to you, you own them = modern slavery.

Wait for the common use of the creditcard.

In the US when i bought a house I got $10.000 Credit on my card.

[SoilSpoil]

We know some middle class families with family incomes up to 200k here that are indebted beyond control. Expensive house, 2 cars, credit card debts cause of designer brand addiction, and expensive schooling for their kids. They'll be in debt till retirement. Scary thought in a economically fragile country. As poster above: we are frowned upon for not spending beyond our means and not buying the latest phones and cars. People also don't understand that I save money first before buying a new motorbike or car.

[Asiantravel]

Of course some people rake up debts to satisfy their desire for luxury goods but most debts are just necessary to survive in a struggling economy. I see most debts coming from paying for a funeral, sickness or a wedding, school fees, agricultural implements, necessary repairs and so on.

Yes, shotgun weddings and buying votes for local elections.

trogers you are heavily involved in real estate. What is your view on how all this could ultimately affect the real estate and particularly condominium market in Bangkok and other cities?

When I read statistics such as “ 9 countries have debt/GDP above 300%, and that a whopping 39% countries have debt-to-GDP of over 100% “ I can’t see any comparison whatsoever to the conditions in 1997 to what is happening globally now. As Thailand and the rest of Asia suffered during that 1997 crisis at least the rest of the world was functioning pretty well and helped the recovery process.

This time around I can't possibly see any other scenario other than everyone is going to sink together in an ocean of debt at the same time?

Edited February 24, 2015 by Asiantravel

[Chao Lao Beach]

Thailand never ceases to baffle me, as all perceived economic theory and wisdom seems to go out of the window in this corner of the world.

Same here. Uncle makes small money, gets new hilux vigo, borrowing money to pay instalments. Never pays anyting back, mai pen rai [emoji202]

I know a single mum who has 48,000b a month in repayments, she makes about 20,000b a month. She just borrows more money to pay back the debt, I honestly believe that she has not concept that borrowing at huge black market rates will catch up with her, at some point it has to come crashing down, well that is my opinion.

I feel it is like her own little ponzi, butshe just doesn't get it. Tommowor is tommorows tommorow in her mind.

[Thian]

Yes the crisis is coming.

Thai culture is all about showing your wealth and keeping up with the Jones'.

[trogers]

Of course some people rake up debts to satisfy their desire for luxury goods but most debts are just necessary to survive in a struggling economy. I see most debts coming from paying for a funeral, sickness or a wedding, school fees, agricultural implements, necessary repairs and so on.

Yes, shotgun weddings and buying votes for local elections.

trogers you are heavily involved in real estate. What is your view on how all this could ultimately affect the real estate and particularly condominium market in Bangkok and other cities?

When I read statistics such as 9 countries have debt/GDP above 300%, and that a whopping 39% countries have debt-to-GDP of over 100% I cant see any comparison whatsoever to the conditions in 1997 to what is happening globally now. As Thailand and the rest of Asia suffered during that 1997 crisis at least the rest of the world was functioning pretty well and helped the recovery process.

This time around I can't possibly see any other scenario other than everyone is going to sink together in an ocean of debt at the same time?

Unlike 1997, most debts are in local currency. Thailand would follow the path of China, who too would face the situation of Japan's lost decades 1990-present.

The keyword is 'Deflation'. Fall in prices of assets, particularly real estate. It would not be a crash and then a climb up, but would be a gradual fall in prices over a decade or more.

Edited February 24, 2015 by trogers

[trogers]

Thailand never ceases to baffle me, as all perceived economic theory and wisdom seems to go out of the window in this corner of the world.

Same here. Uncle makes small money, gets new hilux vigo, borrowing money to pay instalments. Never pays anyting back, mai pen rai [emoji202]

I know a single mum who has 48,000b a month in repayments, she makes about 20,000b a month. She just borrows more money to pay back the debt, I honestly believe that she has not concept that borrowing at huge black market rates will catch up with her, at some point it has to come crashing down, well that is my opinion.

I feel it is like her own little ponzi, butshe just doesn't get it. Tommowor is tommorows tommorow in her mind.

Hence, the moonlighting to cover the difference.

[elgordo38]

Who makes loans to a group of people when only 18% of that group are capable of ever repaying the debt? Are the lenders writing the debts off or keeping them on their balance sheets to stick it to the shareholders or taxpayers when they go bankrupt?

Somebody is making these loans look at all the new cars around. The new car count has to be higher than in the West. Then look at all the well dressed teens sporting the newest of mobiles. All the housing condo's being built. I just heard of a 30 year old divorced teacher(well dressed) who is raising 2 sons on her own( you all know how teens eat, and husband contributes nothing as usual) driving a new Toyota 4 door van. She lives in a large condo (renting). Do teachers make that much?

[angiolo]

Yes sir a depression lies ahead. Banks will call in their debts to no avail . We have had the twice on a global scale and uk is still struggling.

[Robby nz]

I know there are other factors but the Yingluck legacy is a big part of the debt we now see the people and in particular the poor in, for instance from :

http://freedombarometer.org/assets/pdfs/Freedom-Barometer-Special-Report-Thailands-Agrarian-Policy.pdf

Farmers Debt under Yingluck

Coinciding with increases in governmental debt is overall debt held by farmers, which now amounts to 103,047 baht per head.

Since 2010 debts have climbed by 6% per year. About 63% of all households In Thailand are in debt, of which 15 percent originate from the

agricultural sector.

Then there was the farmers and taxi drivers credit cards which encouraged borrowing as well as the already mentioned new car scheme.

Getting out of a debt situation is a lot more difficult than getting into one and there is really no quick fix that any government can put in place.

At present there are schemes in place for so called soft loans for some sectors to attempt to get them out of the high interest loan shark debt trap but that only lowers interest payments in the short term and doesn't pay off loans.

The present situation with drought and low commodity prices as well as general world economic downturn means there is not the income for farmers in particular to enable them to pay off debt.

It is notable that when the rice pledging scheme came into being landlords raised rents and chemical and fertilizer companies prices to get their share, however when the scheme ended the rents and prices never went down again.

[Srikcir]

Is this mortgage or unsecured debt. Make a big difference.

Typically includes home mortgages, home equity loans, auto loans, student loans, and credit cards.

"The amount of credit card debts outstanding for longer than three months increased by 28.4 per cent." - Ms Chutinart, 2014-08-2

"50.4% of the debts were informal loans." - UTCC President Ms Saowanee Thairungroj, 2014-10-17

[Srikcir]

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I know there are other factors but the Yingluck legacy is a big part of the debt we now see the people and in particular the poor in, for instance from :

http://freedombarometer.org/assets/pdfs/Freedom-Barometer-Special-Report-Thailands-Agrarian-Policy.pdf

Farmers Debt under Yingluck

Coinciding with increases in governmental debt is overall debt held by farmers, which now amounts to 103,047 baht per head.

Since 2010 debts have climbed by 6% per year. About 63% of all households In Thailand are in debt, of which 15 percent originate from the

agricultural sector.

Then there was the farmers and taxi drivers credit cards which encouraged borrowing as well as the already mentioned new car scheme.

Getting out of a debt situation is a lot more difficult than getting into one and there is really no quick fix that any government can put in place.

At present there are schemes in place for so called soft loans for some sectors to attempt to get them out of the high interest loan shark debt trap but that only lowers interest payments in the short term and doesn't pay off loans.

The present situation with drought and low commodity prices as well as general world economic downturn means there is not the income for farmers in particular to enable them to pay off debt.

It is notable that when the rice pledging scheme came into being landlords raised rents and chemical and fertilizer companies prices to get their share, however when the scheme ended the rents and prices never went down again.

To be fair, the massive floods of 2011 seriously impacted the finanical well-being of unskilled workers and street vendors who lost both personal unpaid for personal property and their livelyhood. World collapse in rice and rubber value also destroyed many farmers earnings. Only a vibrant economy could restore their earning power. But by the end of 2014 the GDP was substantially down and growth almost stagnant.

Edited February 24, 2015 by Srikcir

[Ricardo]

Surely the poor were promised, "all Thais will be rich after six months", if only they voted the right way in 2011 ?

This just goes to show that it's not quite that easy, or simple to deliver, and that pre-election promises should in future not be believed without question !

No matter who makes them.

One sure consequence will be a wave of requests, to those of us who have Thai family, for assistance. Just like the late-1990s, in fact.

[trogers]

Surely the poor were promised, "all Thais will be rich after six months", if only they voted the right way in 2011 ?

This just goes to show that it's not quite that easy, or simple to deliver, and that pre-election promises should in future not be believed without question !

No matter who makes them.

One sure consequence will be a wave of requests, to those of us who have Thai family, for assistance. Just like the late-1990s, in fact.

The visible sign as to whether they have learnt from the lesson of 2011 is 'how much money they would dump into the lotteries'.

[FangFerang]

When one considers the total amount that "toxic loans" have sucked from the economy, then add in the amount of tax money sent to private schools as a subsidy, then add in the loan-shark tactics used to inflate lottery tickets...

The rice pledging scheme was the same method, but utilized by the wrong people.

More than 700 billion baht was funneled to private schools alone in the last four years, a real government cost, but no one is asking for that money back--oh no, that's not corruption because even though it is the same method -- paying way over market for an even less tangible commodity, being education -- it is the same method with well, just better and different people. If it is not selective tolerated corruption than why is a former MOE one of the five wealthiest Thais and No One is asking for an assets declaration? More than 700 billion baht also flowed into the lottery coffers over the last several years, again the same methods, but this time the three controlling factions for the lottery came from (two out of three) military owned operations. Again, the right people and --whew--we just cant fix everything! Now consider that 85% of the GDP is now on debt, and the amount over the last several years makes 700 billion baht look like a piss in the ocean. Again, it's not what was done, but who did it.

I have to laugh at both sides for different reasons, simply because both are laughingly claiming the moral high grounds of either Democracy or Integrity -- and there is no moral high ground in Thailand. Sure, Yinunlucky and cronies are probably guilty, but I want to see equal enforcement, not this pogrom posing as reform.

I feel certain that strident critics will ignore the parts they don't like, or grudgingly give a half-nod before ranting, but I really don't expect much more than that from mental midgets posing as intellectuals at all.

[Anthony5]

Why do they lend people with no steady income such big money? A new vigo is about a million baht!

Because the banks get richer from it.

[Anthony5]

We know some middle class families with family incomes up to 200k here that are indebted beyond control. Expensive house, 2 cars, credit card debts cause of designer brand addiction, and expensive schooling for their kids. They'll be in debt till retirement. Scary thought in a economically fragile country. As poster above: we are frowned upon for not spending beyond our means and not buying the latest phones and cars. People also don't understand that I save money first before buying a new motorbike or car.

I had to look at the thread title again, because I thought you were talking about the US.

[mikesch4ever01]

debt rising, military government, 0 percent growth...just a question of time until the economic crash...

[Thai at Heart]

Thailand's growth the last couple of years been faked, most of it been on borrowed money, and I assume many of the new big buildings all over Bangkok been build by money amassed by corrupt politicians and their cronies. They have probably forgot already what caused the 97 crisis.

Children of those who caused the 97 crisis were too young to remember. They need to learn first hand, and not from history.

The 97 mess is not the same as this. That was a currency credit crisis, this is not the same and any fall out will not be the same in terms of currency movement. They have 200bn USD in the bank to sure up the currency.

This is not an apples and apples situation.

[NeverSure]

Thailand's growth the last couple of years been faked, most of it been on borrowed money, and I assume many of the new big buildings all over Bangkok been build by money amassed by corrupt politicians and their cronies. They have probably forgot already what caused the 97 crisis.

Children of those who caused the 97 crisis were too young to remember. They need to learn first hand, and not from history.

The 97 mess is not the same as this. That was a currency credit crisis, this is not the same and any fall out will not be the same in terms of currency movement. They have 200bn USD in the bank to sure up the currency.

This is not an apples and apples situation.

I don't know what kind of a mess it is. I really don't. It appears that everyone can see a big problem on the horizon.

You're right they have $200bil in USD but they can't spend it bailing themselves out. They have it so that they can engage in international trade. They get paid in USD and they buy in the same. No one would accept baht and no one is going to pay in baht. If Thailand used its USD to bail itself out of a crisis it would be out of the international trade arena the next day.

The same is true with China and is why some mistakenly think that China has so much money that it lends it to the US. "The US owes China money." Well, yes it does but China holds those treasuries to back its international trades. The USD is the unit of international trade. If either China or Thailand sold those treasuries to anyone, including the US Fed, they would be out of biz.

No doubt there are bubbles building in consumer credit and housing at the very least. I'm not going to predict when Thailand will go on its lips. This does remind me of the US just before the crash of 2008 (or 2007 depending on how you look at it) when there were bubbles in housing, consumer debt, and the stock market. People were buying like there was no tomorrow and the government allowed it by encouraging easy credit - too easy.

"Prices have been rising since 1980 and therefore they will always rise" isn't a very good formula for forecasting, but that's what people began to believe.

Edited February 25, 2015 by NeverSure

[maidee]

my neighbor just bought this, so for face, i have to go borrow to buy bigger

mentality

[Thai at Heart]

Thailand's growth the last couple of years been faked, most of it been on borrowed money, and I assume many of the new big buildings all over Bangkok been build by money amassed by corrupt politicians and their cronies. They have probably forgot already what caused the 97 crisis.

Children of those who caused the 97 crisis were too young to remember. They need to learn first hand, and not from history.

The 97 mess is not the same as this. That was a currency credit crisis, this is not the same and any fall out will not be the same in terms of currency movement. They have 200bn USD in the bank to sure up the currency.

This is not an apples and apples situation.

I don't know what kind of a mess it is. I really don't. It appears that everyone can see a big problem on the horizon.

You're right they have $200bil in USD but they can't spend it bailing themselves out. They have it so that they can engage in international trade. They get paid in USD and they buy in the same. No one would accept baht and no one is going to pay in baht. If Thailand used its USD to bail itself out of a crisis it would be out of the international trade arena the next day.

The same is true with China and is why some mistakenly think that China has so much money that it lends it to the US. "The US owes China money." Well, yes it does but China holds those treasuries to back its international trades. The USD is the unit of international trade. If either China or Thailand sold those treasuries to anyone, including the US Fed, they would be out of biz.

No doubt there are bubbles building in consumer credit and housing at the very least. I'm not going to predict when Thailand will go on its lips. This does remind me of the US just before the crash of 2008 (or 2007 depending on how you look at it) when there were bubbles in housing, consumer debt, and the stock market. People were buying like there was no tomorrow and the government allowed it by encouraging easy credit - too easy.

"Prices have been rising since 1980 and therefore they will always rise" isn't a very good formula for forecasting, but that's what people began to believe.

The problem today is domestic baht lending for construction, not USD borrowing for turning into loans for construction.

Its not the same thing as 97.