Even during the former period of stronger economic growth, many economists presciently warned that the high level of household debt was a lag factor on the Thai economy. The debt now represents nearly ฿186,000 for every person living in Thailand. At a time of strong economic headwinds, it is now, unfortunately, a bigger problem than ever.

An assistant governor at the Bank of Thailand on Monday warned about the danger of Thailand’s growing amount of household debt and the potential negative repercussions of reduced income levels for some borrowers impacted by the contraction of exports and an overall slowing of growth.

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Titanun Mallikamas is an assistant governor at the Bank of Thailand. This week he expressed concern at the upward trajectory of household borrowing in Thailand in particular in a scenario with deteriorating incomes in some sectors.

A full report on the state of the Thai economy was presented on Monday from the National Economic and Social Development Council. It did not tell us anything that came as a surprise but one thing stands out. The steadily increasing level of household debt not particularly in debt to GDP ratios which is the normal quoted figure but the absolute figure for money borrowed by Thai individuals from banks and institutions.

The figure has climbed steadily quarter by quarter since the beginning of 2017 and now stands at a massive ฿13 trillion. That’s ฿185,710 for every person living in Thailand if we were to assume a population of 70 million approximately.

Non-performing debt rose 10% in the second quarter even as personal borrowing grew

Economists have always known that the issue was holding back the economy but the effect in the current economic slowdown could be more severe. The figures on Monday showed non-performing loans rising by 10% and suggested growth in personal borrowing of 9.2% in the second quarter of the year from Thailand’s retail banks.

Thai economy is still growing – sluggishly

Figures released in recent days for July show the Thai economy is still, in fact, growing albeit at a very reduced rate but the effects of the sharp contraction in exports has been filtering through and has even led to a slight rise in unemployment for the second quarter even though the unemployment level is still below that of last year at 0.98%.

It should also be noted that from incomes in Thailand in real terms grew from last year even when compared with the second quarter, helped by lower than expected inflation.

Bank of Thailand closely monitoring the issue

The higher level of household debt is concerning the economic heads at the Bank of Thailand. Titanun Mallikamas who is an assistant governor at the bank said this on Monday: ‘We are closely monitoring household debts, as Thai families are vulnerable to an income shock during the economic slowdown.’

Lower inflation rate for August at 0.57%

For hard-pressed consumers, there is some good news with a very low inflation figure for August at 0.57%. This and the slowing of growth may have been another impetus for the Bank of Thailand when it strikingly lowered interest rates last month by 25 points against market expectations.

It is still not certain that they will follow it with a further cut but many analysts believe this may happen as the evidence is that the domestic economy appears to be slowing down.

Still more people at work in the non-agricultural sector despite the slowdown in economic growth

The areas that appear to be most strongly hit by the slow down are storage and transport, building, agriculture, education and the hotel sector. The hotel sector shows a marginal drop in employment of over 1%.

The figures actually show that there were 1.5% more people employed in the second quarter of the year in the non-farming sector of the Thai economy. Things might be slowing down but it would appear many Thai people still want to work and can find it.

New pattern of online employment emerging

The National Economic and Social Development Council has highlighted what it sees from the economic data as a rise in employment in areas such as couriers and delivery services linked with internet-based firms. It is calling on the Thai government to legislate for what is now emerging as a new pattern of work. The objective of such legislation would be both protect workers rights and to uphold consumer rights.

Hopes rest on improved tourism prospects, economic stimulus but for many, debt is a heavy burden

A bright spot appears to be a pick up in tourism with minister Phiphat Ratchakitprakarn predicting a record-breaking year despite some mid-year pessimism from hotels and tourist businesses in Pattaya and Phuket.

The effects of the government’s economic stimulus measures should also soon have a bearing. 

While the central bank is this week warning of the dangers of a shock deterioration in income prospects for overborrowed consumers and workers, this might be something that is already happening and may explain what appears to be a remarkable downturn caused since the beginning of the year.

฿13 trillion headache

Even when the economy was growing in recent years, many economists had been persistent in warning about the lag factor caused by high levels of household debt, nearly ฿13 trillion of a headache spread across millions of Thai families.

Further reading:

Thai central bank boss introduces new ‘debt clinic’ as he urges action on kingdom’s high household debt

Debt means death as a crazed Thai man slaughters his loving wife and children in Bangkok in horror scene

14 wealthy loan sharks taken in by Thai police as money lending menace and debt remain a big problem

The pervasive problem of debt in Thailand and the struggle to survive for those hit by bad fortune

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