English
Thailand: Govt vows to tackle household debt
The government has vowed to tackle high household debt, incurred by credit card and personal loans, and offer measures to strengthen the competitiveness of local financial institutions in the long term.
Prime Minister Prayut Chan-o-cha said on Tuesday that all related agencies. including the Bank of Thailand (BoT) are being ordered to accelerate addressing the debt burden among various groups of people.
“If people have a high debt burden, especially at a young age, it will affect them for the rest of their lives,” said the premier.
According to Gen Prayut, the cabinet on Tuesday acknowledged the debt problem faced by various groups of Thais, particularly students, teachers, civil servants, car and motorcycle leasing clients and those who have taken personal loans.
“Within six months, related agencies are required to reduce the interest rate of personal loans, microfinance and nanofinance small-scale debtors, teachers and cooperatives, as well as car and motorcycle leasing businesses,” he said.
He said related agencies are also required to organise debt relief schemes for student loans, personal loans, debt to specialised financial institutions (SFIs) and cooperatives, and non-performing loans of small and medium enterprises.
The central bank has been asked to review the ceiling of interest rates and supervise credit cards, personal loans and vehicle title loans.
The BoT should also supervise financial institutions to help reduce the risk to their debtors, he said.
According to Gen Prayut, the government will come up with measures to help financial institutions in the next phase to offer lower interest rates and provide aid measures to help young and retired people who have a debt burden.
The government also pledges to establish a new agency to supervise the car and motorcycle leasing business.
Thailand’s household debt stood at 14 trillion baht in 2020, equal to 89.3% of gross domestic product (GDP).
According to data from the central bank as of Dec 2020, the household debt burden was the result of credit card and personal loans. The debt burden covering principal loans and interest for these two unsecured loan products represented 58% of total consumer loans.
The BoT has estimated the country’s household debt in the first quarter of 2021 grew by around 5% year-on-year. In the fourth quarter of 2020, Thai household debt grew by 3.9% year-on-year.
Last Tuesday, Don Nakornthab, senior director of the financial stability department at the BoT, forecast a crossroads for the country’s household debt over the next four years, either rising to 92.8% of GDP or declining to 79.1%.
If Thai household debt grows 1.2 times GDP average growth over the past five years, the country’s household debt will increase to 18.1 trillion baht or 92.8% of GDP by 2025, up from 14 trillion baht in 2020 or 89.3% of GDP, Mr Don said.
If household debt increases at 2% per year on average, Thailand’s household debt will rise to 15.4 trillion baht or 79.1% of GDP by 2025.
Source: https://www.bangkokpost.com/business/2132959/govt-vows-to-tackle-household-debt