Thai households struggle with record debt, COVID-19 increases burden

By Orathai Sriring and Satawasin Staporncharnchai

BANGKOK, April 5 (Reuters)Thai farmer Jamras Kongchai is struggling to repay 500,000 baht ($ 16,082) in debt because the money from the sale of her crops is not enough to make the payments.

Adding to the pressure, the coronavirus outbreak shut down a small construction company where she worked for $ 10 a day for much-needed extra income.

“I’m so in debt and don’t know what to do,” said the 51-year-old single mother, who traveled from northern Kamphaeng Phet province to join a protest by indebted rice farmers in Bangkok. last month, calling on the government to help reduce their debt burden.

Jamras has only reimbursed part of the interest since 2013 and has not disturbed the principle. This year, she has to pay 40,000 baht in interest, but she has no money. “Hope to get some help.”

Such protests have put additional pressure on the Thai government, which is already grappling with increasing pro-democracy protests and struggling to revive the economy hit by the pandemic.

Thai households are among the largest borrowers in Asia, accumulating debt of 14 trillion baht, or 89.3% of gross domestic product (GDP) at the end of December, a sharp increase from 78.1% in 2017 And, they find it increasingly difficult to keep track of payments.

Household debt levels are the highest since the central bank started keeping records in 2003.

High debt also poses a risk to financial stability and restricts consumer spending in Southeast Asia’s second-largest economy, hampering a recovery from the coronavirus crisis. The economy suffered its deepest slump in more than two decades last year, as exports declined and the vital tourism sector was shaken by the lack of foreign visitors.

New COVID-19 outbreaks have added pressure on some businesses and households, the central bank said last month, when it slashed its outlook for gross domestic product (GDP) growth from 2021 to 3% from 3.2%, noting that the economy would not return to pre-pandemic levels until mid-2022.

Although the latest outbreak of infections has been largely contained, it has heightened fears that an economic rebound will be slow and uneven, prolonging pain.

“Even before COVID, our debt-to-GDP ratio was already the highest among emerging markets,” said Yunyong Thaicharoen, chief economist at Siam Commercial Bank.

“This is above a level which has a huge impact on GDP and household spending,” he said, adding that the debt ratio could peak at 90-91% of GDP in the month. first trimester.

The government has pledged 1,000 billion baht in relief to mitigate the impact of the epidemic, but some say relief is not being rolled out quickly enough for many Thais. Last year, a woman took rat poison outside the finance ministry to protest the slow response. She survived and was promised her payment a few days later.

MOUNTAIN OF DEBT

The growing debt burden is likely to dampen private consumption, which accounts for half of Thailand’s $ 502 billion GDP, and will hurt lenders’ incomes if more loans go wrong.

Granted, the pandemic slowed demand for loans last year, but the collapsing economy has also made it harder for people to repay their loans.

Consumer loans rose 4.6% last year, slowing from a 7.5% increase in 2019 as the epidemic reduced household purchasing power, according to the central bank.

But loans with a significant increase in credit risk surged, with auto loans reaching 9.5% of loans, the highest for at least three years.

However, the lender Muangthai Capital MTC.BK, remains optimistic, targeting 20-25% annual loan growth over the next four years.

“The industry still has sufficient room for growth,” deputy managing director Parithad Petampai said, noting that the company’s loans increased tenfold to 70 billion baht last year from 2014.

For years, easy credit for consumers and businesses has sparked many warnings about the dangers of rising household debt in Thailand, and now the pandemic has left millions of people out of work.

About 4.7 million workers are at risk of being affected by the outbreak, of which 1.2 million workers could become unemployed or underemployed, the central bank said in January.

Even after the economy has recovered and more jobs become available, the debt distress will take a long time to tackle.

“We may earn more but it will go to servicing the debt, there is not much left to spend,” said Aree Onkloi, 22, a laborer from northern Phitsanulok province, whose family owes close to. one million baht.

“We will have to continue to borrow and never get out of it.”

($ 1 = 31.09 baht)

Thai household debthttps://tmsnrt.rs/31FwZzZ

(Reporting by Orathai Sriring, Satawasin Staporncharnchai and additional reporting by Kitiphong Thaichareon, edited by Kay Johnson and Kim Coghill)

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