Household debt in Thailand continues to rise

[trogers]

Over 30% of debtors cannot repay their debts, and it is not worrying.

So at what % should the worry starts?

Do you believe these figures ?.. I mean 30% that would be a total disaster

I read it more as percentage of people not paying rose with 30% not of all loans.. but of people not paying.

Maybe it was 9% before and now 12% (just fictive numbers that are easy for calculation)

The article said 'rose to...' and not 'rose by...'.

If its true (find it hard to believe that 1 in 3 does not pay its debts and it causes no trouble for banks) then its pretty disastrous.

That's 30% of no. of people, not 30% of total loan.

Say if 20% of total loan in the banking system goes to individuals, and 30% of them defaulted, the projected NPLs is 6% in the system.

Edited February 24, 2015 by trogers

[Xircal]

have to wonder when they are going to start teaching thais how to manage their money and not take out higher purchase on cars, homes etc when they simply dont earn enough to pay for it. It amazes me how many buy a new car then cant afford to buy food or even the fuel to drive it, it seems face is too high on their lists & that it even surpasses their wife and families well being/survival.

Still those debt rates are not that high compared to western countries..

France 93,5

UK 90,6

Germany 78,4

Netherlands 73,5

Yes, but all the countries you've quoted are European and their citizens earn decent salaries.

As seajae points out, many families will buy a new car, or a pickup truck purely on a whim.

I know of one such family who bought a new pickup even though nobody knew how to drive it. But having a new pickup elevated their status in the village. Six years later and they're still paying for it.

[robblok]

Do you believe these figures ?.. I mean 30% that would be a total disaster

I read it more as percentage of people not paying rose with 30% not of all loans.. but of people not paying.

Maybe it was 9% before and now 12% (just fictive numbers that are easy for calculation)

The article said 'rose to...' and not 'rose by...'.

If its true (find it hard to believe that 1 in 3 does not pay its debts and it causes no trouble for banks) then its pretty disastrous.

That's 30% of no. of people, not 30% of total loan.

If so then yes I can accept it as it does not say that much. (but its bad)

[robblok]

have to wonder when they are going to start teaching thais how to manage their money and not take out higher purchase on cars, homes etc when they simply dont earn enough to pay for it. It amazes me how many buy a new car then cant afford to buy food or even the fuel to drive it, it seems face is too high on their lists & that it even surpasses their wife and families well being/survival.

Still those debt rates are not that high compared to western countries..

France 93,5

UK 90,6

Germany 78,4

Netherlands 73,5

Yes, but all the countries you've quoted are European and their citizens earn decent salaries.

As seajae points out, many families will buy a new car, or a pickup truck purely on a whim.

I know of one such family who bought a new pickup even though nobody knew how to drive it. But having a new pickup elevated their status in the village. Six years later and they're still paying for it.

Sorry but as an accountant I see a lot of people in the west also taking loans for 4 years for new car. Its called leasing and such. In the end its all about disposable income. Thais put a lot less money in their homes as westerners do.

Seems many want Thais to be poor and not able to have a car because they are retired and can't afford one themselves and get pressured by surroundings. Thus its easier to act like all Thais are poor and buy cars they can't afford as to accept that its easier for Thais to get a car and that hey have different priorities.

[SoilSpoil]

Before you start comparing household debt per country, it's important to know what the income distribution is within a country. What is the amount of household debt compared per income bracket per person? If you earn $100,000 a year and you have a household or mortgage debt of 200,000, you'll sleep a lot better than when you earn 10 dollars a day and own the banks $200,000. You can check the Gini index for wealth distribution in countries. Giving the ratio of debt to that of the GDP is not an indicator of the general impact of debt on society or economy.

[robblok]

Before you start comparing household debt per country, it's important to know what the income distribution is within a country. What is the amount of household debt compared per income bracket per person? If you earn $100,000 a year and you have a household or mortgage debt of 200,000, you'll sleep a lot better than when you earn 10 dollars a day and own the banks $200,000. You can check the Gini index for wealth distribution in countries. Giving the ratio of debt to that of the GDP is not an indicator of the general impact of debt on society or economy.

Good point I agree.. but there are so many unknowns here its hard to make a comparison.

But foreigners think they are wealthy.. here below some cost the Thais dont have but foreigners have

- paying wife and family a salary (most Thais I know the wife works and contributes) you can drive a car for the difference

- healthcare (i know i pay enough for my insurance) Thais don't have too

- I keep my house nice good quality stuff.. Thais don't care that much in general most meetings are not in a house

- foreigners often go back on trips.. paying for themselves and the wife.. (just calculate the saving)

- foreigners eat more expensive foods

So all in all Thais have a lot less costs and usually work as a family unit to pay for things (and often have almost no backup) but farangs dont.. just different priorities and working like that they CAN afford those shiny new cars.

Of course not all of them can and some get over their head but I know the same happens back home to many people.

[Jungle Jim]

The biggest mistake the Thais can make is to copy us foreigners. Don,t worry a crash is coming they will never forget. Back to the grass hut.

have to wonder when they are going to start teaching thais how to manage their money and not take out higher purchase on cars, homes etc when they simply dont earn enough to pay for it. It amazes me how many buy a new car then cant afford to buy food or even the fuel to drive it, it seems face is too high on their lists & that it even surpasses their wife and families well being/survival.

[ronwparker]

The middle class here live on debt-the thing that is lacking is most Thais are not good at planning(somewould say thinking beyond the end of their noses!

[trogers]

Before you start comparing household debt per country, it's important to know what the income distribution is within a country. What is the amount of household debt compared per income bracket per person? If you earn $100,000 a year and you have a household or mortgage debt of 200,000, you'll sleep a lot better than when you earn 10 dollars a day and own the banks $200,000. You can check the Gini index for wealth distribution in countries. Giving the ratio of debt to that of the GDP is not an indicator of the general impact of debt on society or economy.

Good point I agree.. but there are so many unknowns here its hard to make a comparison.

But foreigners think they are wealthy.. here below some cost the Thais dont have but foreigners have

- paying wife and family a salary (most Thais I know the wife works and contributes) you can drive a car for the difference

- healthcare (i know i pay enough for my insurance) Thais don't have too

- I keep my house nice good quality stuff.. Thais don't care that much in general most meetings are not in a house

- foreigners often go back on trips.. paying for themselves and the wife.. (just calculate the saving)

- foreigners eat more expensive foods

So all in all Thais have a lot less costs and usually work as a family unit to pay for things (and often have almost no backup) but farangs dont.. just different priorities and working like that they CAN afford those shiny new cars.

Of course not all of them can and some get over their head but I know the same happens back home to many people.

All these observations are good info, but the issue here is - 30% of individual lenders are defaulting.

Does the West have such an experience? If yes, what crisis created such a high default?

[robblok]

Before you start comparing household debt per country, it's important to know what the income distribution is within a country. What is the amount of household debt compared per income bracket per person? If you earn $100,000 a year and you have a household or mortgage debt of 200,000, you'll sleep a lot better than when you earn 10 dollars a day and own the banks $200,000. You can check the Gini index for wealth distribution in countries. Giving the ratio of debt to that of the GDP is not an indicator of the general impact of debt on society or economy.

Good point I agree.. but there are so many unknowns here its hard to make a comparison.

But foreigners think they are wealthy.. here below some cost the Thais dont have but foreigners have

- paying wife and family a salary (most Thais I know the wife works and contributes) you can drive a car for the difference

- healthcare (i know i pay enough for my insurance) Thais don't have too

- I keep my house nice good quality stuff.. Thais don't care that much in general most meetings are not in a house

- foreigners often go back on trips.. paying for themselves and the wife.. (just calculate the saving)

- foreigners eat more expensive foods

So all in all Thais have a lot less costs and usually work as a family unit to pay for things (and often have almost no backup) but farangs dont.. just different priorities and working like that they CAN afford those shiny new cars.

Of course not all of them can and some get over their head but I know the same happens back home to many people.

All these observations are good info, but the issue here is - 30% of individual lenders are defaulting.

Does the West have such an experience? If yes, what crisis created such a high default?

No idea.. love to compare numbers.. if it is truly 30%.. that is super high..If these are unsecured loans.. It would break banks I guess. I can't believe the banks aren't taking a big hit. Maybe they are not yet putting these figures correctly on their balance sheet or something.

[wolfjob]

have to wonder when they are going to start teaching thais how to manage their money and not take out higher purchase on cars, homes etc when they simply dont earn enough to pay for it. It amazes me how many buy a new car then cant afford to buy food or even the fuel to drive it, it seems face is too high on their lists & that it even surpasses their wife and families well being/survival.

THEY MUST HAVE BEEN WATCHING THE SITUATION IN THE US AND ARE NOW TRYING TO COPY IT.

[trogers]

have to wonder when they are going to start teaching thais how to manage their money and not take out higher purchase on cars, homes etc when they simply dont earn enough to pay for it. It amazes me how many buy a new car then cant afford to buy food or even the fuel to drive it, it seems face is too high on their lists & that it even surpasses their wife and families well being/survival.

THEY MUST HAVE BEEN WATCHING THE SITUATION IN THE US AND ARE NOW TRYING TO COPY IT.

I am more inclined to think that they took on loans with the ability to pay. Income then was part declared, and part that could not see sunlight.

Now with crackdowns on corruption, income stream is much reduced.

[mommysboy]

I read it as a straight 30%. Banks are softer on defaulters tending not to class as defaulted.

[Srikcir]

Gen. Prayut's plan for lower household debt, "Please refrain from racking up debts," 2015-02-11

However, he did have state-owned banks, such as the Government Savings Bank, the Bank for Agriculture and Agricultural Cooperatives and SMEs Bank, provide soft, uncollateralized loans for low-income earners so they could payoff loan sharks. Looks like people just took advantage of another way to borrow money without paying.

Now that the Junta has edged the economy towards deflation and possible higher unemployment, household debt is becoming even more difficult to pay down. By Summer 2015 Thailand will see further highs in houlsehold debt, higher than any of the ASEAN countries.