Although the coronavirus outbreak has not significantly impacted the unemployment rate, due to workers moving from the service sector to the farm sector in their hometowns, the pandemic has induced a rise in under-employment because of a decline in working hours, said governor Sethaput Suthiwartnarueput.
The scenario has led to lower household income and reduced debt repayment ability among consumers, Mr Sethaput said.
The ratio of household debt to GDP rose to 84% in the second quarter, an 18-year high, with a value of B13.6 trillion, up from B13.5trn or 80.3% of GDP in the first quarter, according to central bank data.
The ratio could rise to 88-90% at year-end 2020 as a result of the economic slowdown, said Kasikorn Research Center.
Given households’ weaker debt-servicing ability, this could further increase the household debt ratio, Mr Sethaput said.
The higher under-employment rate will particularly come from the tourism sector, which has been feeling a heavy impact from the pandemic, he said.
Although exports are another sector affected by the pandemic, this segment has endured a lesser impact than the tourism industry because 50% of the country’s shipments come from the three core industries, namely automotive, electronics and petrochemicals.
As the economic recovery is poised to remain uneven, it will take at least two years for the economy to return to the pre-Covid growth trajectory, according to the central bank.
Under this scenario, the labour market and employment conditions will need more time to return to normalcy, Mr Sethaput said.
The central bank predicts the economy to contract by 7.8% this year, with the figure expected to improve to 3.6% next year.
The Bank of Thailand forecasts Thailand’s economy to begin showing a positive growth rate in the second quarter of 2021 and return to a normal growth trajectory in the third quarter of 2022.
Central bank officials have implemented targeted debt moratorium measures, scheduled to end next June, for small and medium-sized enterprises (SMEs) with a credit line below B100 million and having difficulty servicing existing debt.
The measures will only apply to targeted SMEs that cannot cope with repaying loans to financial institutions, on a case-by-case basis.
Broad-based measures, particularly the suspension of principal and interest payment, would lead to moral hazard and financial indiscipline, which could subsequently affect the country’s household debt ratio.
“Today’s debt suspension could result in a debt balloon for the next day, increasing the financial burden of borrowers,” Mr Sethaput said. “Therefore the central bank wants to ask borrowers who cannot service debts to contact banks about debt restructuring.”