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Household debt at new high

BANGKOK: Average household debt in the year to date has risen by 20.2 per cent, the highest growth in nine years, according to a survey by the University of the Thai Chamber of Commerce (UTCC).

economics, politics,

Bangkok Post

Friday 16 September 2016, 09:01AM

Household debt at new high

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.

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“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.


Read original story here.



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Joe12 | 17 September 2016 - 12:44:43

Kurt...You're not very good as an economist either Kurt. The figures are not alarming as you suggest, nor are cars houses, machinery irrelevant. As the article points out, this is what consists of majority of the household debt. If an asset is repossessed for whatever reason, they do not get into further debt as you suggest. 

As for the teachers I commend their union for negotiating more favourable repayments terms for it's members. If one extrapolates the figures for loans to teachers into the wider community there would be little difference. All countries have similar problems and not only confined to individuals, States themselves rack up considerable debt and unable to pay - and they are running the country. Thailand at present is undergoing a steady increase in its GDP from a slump following the coup. 

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Kurt | 17 September 2016 - 07:59:42

Swerv: The article was about ..."average household depts'..
Average household depts.! The increasing figures are alarming.
And it is a lot compared with many other countries.
And depts have to paid back who ever it owns. Sooner or later.
No need to talk about cars( people need to go to work)houses ( people need to live in), heavy machinery ( people need to make their income).
Put it on auction? So many, it makes it worthless.
Take that away from them and people are going down in deeper depts.
Well the signals are out already that thousands  teachers with huge depts are not able to pay their depts.
It influents their private and professional life.
( more interested in money making private tuition than good teaching in school classes. Government already worries about that)
Perhaps that also gives a clue why sometimes teachers become violent towards students.
A outburst of feeling not being in control of their own life?

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swerv | 16 September 2016 - 14:34:38

Kurt: as reported:

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.

Is this necessary?: Are the thai salaries to low, or do thai people not know how to budget? No debt in your country Kurt? Stop knocking the Thai people.

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Kurt | 16 September 2016 - 11:50:55

What is here the problem?
Are the thai salaries to low, or do thai people not know how to budget?
A while ago we red about thousands of thai teachers in deep dept. Unable to 'climb' out of it.

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