Thanavath Phonvichai, director of the UTCC’s Centre for Economic and Business Forecasting, said the latest poll of 1,221 respondents found the biggest increase in household debt since the survey began in 2008.
Average debt has risen to B298,000 per household from 248,000 baht at the end of 2015.
The key difference is the growth rate this year, Mr Thanavath said.
“Since we started conducting surveys, the initial growth was 2.2% and has since risen in single digits, with the most significant increase in 2013 with 12% growth, compared with 5.7% in 2012,” he said. “Even though the growth rate has been in double digits ever since, it had peaked at 16% growth in 2014.”
Mr Thanavath said the figure is no cause for alarm at the moment, as there has been a significant shift in the source of borrowing, between financial institutions and loan sharks.
Most respondents (62%) said they have borrowed from financial institutions, while the percentage of those who borrowed from non-formal sources of funds, such as loan sharks, has fallen to 38%, the lowest in nine years.
“Most debt came from three types of lenders, including auto leasing, housing loans or extending credit lines for working capital to use in business operations,” Mr Thanavath said.
The respondents have faced rising household debt since 2013, mainly due to the first-time car buyer and homebuyer schemes introduced by Yingluck Shinawatra’s government.
The resulting rise in household debt has remained until now.
The rice-pledging scheme has been more detrimental, creating expectations of future income streams that could not be achieved.
Consequently, they were confident in borrowing from hire purchase schemes for goods such as cars, electrical appliances and expensive smartphones.
“The consequences of these policies on household debt remain, and this year’s sluggish economy reduced availability of cash for small-business operators, which further induced borrowing,” Mr Thanavath said. “That’s why debts shot up.”
The figure is not yet a concern, as the majority of the debts are owed to financial institutions, with assets such as cars, houses or heavy machinery used as collateral.
“Despite the high growth rate of the debt, the risks of default that might affect the banks’ non-performing loan would be limited,” Mr Thanavath said.
Thailand's swelling household debt has dampened consumption and economic growth.
Household debt in 2015’s final quarter climbed to B11 trillion or 81.5% of GDP, an increase from 10.8 trillion or 80.8% of GDP in the third quarter.
“We are among the top 10 nations with the highest household debt in the world, which creates a real obstacle for economic development, and in the long term commercial banks will find it increasingly difficult to provide loans because of the high risks,” Mr Thanavath said.
He said that even if household borrowing continues over the next three years, household debt is not likely to become a serious problem.
“So far, we can see that the government is moving in the right direction as they continue to encourage borrowers to access the formal lending system rather than become hapless victims of loan sharks as seen in previous years,” Mr Thanavath said.
He said that if the government can boost GDP growth to 4% a year, then the ability to repay debt of households will consequently rise in line, especially given that their main purpose of borrowing is to facilitate business operations, a need which will subside along with the growth of economy.
Central bank governor Veerathai Santiprabhob said the Thai economic recovery is expected to continue at a gradual pace for the second half of the year, but the country is facing greater external risks.
He referred to the rate-setting committee's statement in saying that Thailand, in the coming period, will be facing higher risks from the fragile global economic rebound and uncertainties from monetary policies of major advanced economies.
“Looking at the MPC's statements, we [the central bank] clearly stated that we are ready to use monetary policy if the economic conditions turn out to vary from our estimations, especially from external risks that may be higher than we expected,” Mr Veerathai said.
He said the Thai economy will also be facing a spate of internal risks, namely the continuation of private consumption and non-performing loans in the banking sector.
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