Thai pandemic borrowing binge prompts calls for repayment delays
Thai pandemic borrowing binge prompts calls for repayment delays
https://asia.nikkei.com/Business/Financ ... 5&si=44594
Thai pandemic borrowing binge prompts calls for repayment delays
Household debt emerges as campaign issue with general election looming
As Thailand draws closer to general elections, the second largest party in the ruling coalition is promising stressed-out households a three-year debt holiday. © Getty Images
FRANCESCA REGALADO, Nikkei staff writerFebruary 8, 2023 13:35 JST
BANGKOK -- The surge in Thai consumer borrowing during the pandemic has become a campaign issue in the Southeast Asian country, with populist politicians pushing for a multi-year debt holiday.
Thai households owe more as a percentage of gross domestic product than any other country in the region, according to the latest Bank of Thailand figures, reflecting a jump in borrowing that occurred as COVID dealt a blow to an economy that relies heavily on tourist revenues.
Thai consumer debt stood last September at 14.9 trillion baht, or 86.8% of GDP, up from 70% in early 2020. Between 2019 and 2020, consumer loan delinquencies of up to 90 days tripled to more than 1 trillion baht -- and have stayed above that level ever since, the central bank says.
"COVID has turned people with good discipline into ones with severe debt in just two years," Surapol Opasatien, chief executive of the National Credit Bureau, which tracks millions of debtors for the country's banks, told reporters in December.
Government forbearance programs have helped cushion the blow for borrowers. But many of these efforts are due to expire in the next few months, and with general elections looming, some Thai politicians are calling for further repayment delays.
The second-largest party in the governing coalition, the Bhumjaithai Party, has proposed a three-year consumer-debt holiday financed by the issuance of new government bonds.
"COVID has put us through tough times for three years. So, whoever has lawful debt, Bhumjaithai will give you a debt holiday of up to 1 million baht for three years," said Anutin Charnvirakul, the party's leader and Thailand's health minister.
Chartthaipattanakla, a party led by a former finance minister, has called for replacing the National Credit Bureau's debtor list with a formal credit scoring system. The Bank of Thailand and commercial banks have opposed the proposal, arguing it would undermine the credibility of the Thai banking system and make it harder to make loans.
The debt burden on individuals factored into the central bank's hesitance last year to raise interest rates in line with the U.S. Federal Reserve and neighboring countries. The bank finally bowed to inflation in August, and the policy rate now stands at 1.5% after four rate hikes.
The policy change will increase the burdens on borrowers of limited means who have taken on floating-rate loans, said Thitima Chucherd, head of economic and financial market research at SCB Economic Intelligence Center. "Although the impact of interest rate hikes may be limited to some certain types of debt, a higher debt burden could make those low-income households become more vulnerable."
Since 2017, the central bank has been working with lenders to restructure consumer debts of up to 2 million baht. More than 30,000 debtors with a combined 6.85 billion baht in principal were in the program as of August.
One of those participants, Mam, a single mother in northern Thailand, said she found herself struggling with debt since she shut down her part-time flea-market business four years ago after having a child. She owed money on her business credit card, a personal loan from her employer on another job and on loans for two cars, both of which were eventually seized.
Last year, she applied to the Bank of Thailand's debt mediation program. The clinic took on 60% of her 163,000 baht credit-card debt and reduced her monthly payment to 750 baht. "I used to feel that I had nowhere to turn, but I decided to participate in the debt clinic," Mam said.
Monitoring Thailand's consumer debt burden is tricky for the central bank because the commercial banks it oversees only account for 43% of household loans. The rest are made by other kinds of financial companies, such as specialized lenders and savings cooperatives.
The impact on banks depends on their customer mix. Profits at Bangkok Bank, the largest Thai bank by assets, rose 10.6% last year, reflecting strong returns from corporate customers. By contrast, Thailand's second-largest bank, Kasikornbank, which lends mainly to consumers and smaller businesses, reported a 6% fall in profits in 2022 as provisions for bad loans increased 28.73% to 51.9 billion baht.
Thai pandemic borrowing binge prompts calls for repayment delays
Household debt emerges as campaign issue with general election looming
As Thailand draws closer to general elections, the second largest party in the ruling coalition is promising stressed-out households a three-year debt holiday. © Getty Images
FRANCESCA REGALADO, Nikkei staff writerFebruary 8, 2023 13:35 JST
BANGKOK -- The surge in Thai consumer borrowing during the pandemic has become a campaign issue in the Southeast Asian country, with populist politicians pushing for a multi-year debt holiday.
Thai households owe more as a percentage of gross domestic product than any other country in the region, according to the latest Bank of Thailand figures, reflecting a jump in borrowing that occurred as COVID dealt a blow to an economy that relies heavily on tourist revenues.
Thai consumer debt stood last September at 14.9 trillion baht, or 86.8% of GDP, up from 70% in early 2020. Between 2019 and 2020, consumer loan delinquencies of up to 90 days tripled to more than 1 trillion baht -- and have stayed above that level ever since, the central bank says.
"COVID has turned people with good discipline into ones with severe debt in just two years," Surapol Opasatien, chief executive of the National Credit Bureau, which tracks millions of debtors for the country's banks, told reporters in December.
Government forbearance programs have helped cushion the blow for borrowers. But many of these efforts are due to expire in the next few months, and with general elections looming, some Thai politicians are calling for further repayment delays.
The second-largest party in the governing coalition, the Bhumjaithai Party, has proposed a three-year consumer-debt holiday financed by the issuance of new government bonds.
"COVID has put us through tough times for three years. So, whoever has lawful debt, Bhumjaithai will give you a debt holiday of up to 1 million baht for three years," said Anutin Charnvirakul, the party's leader and Thailand's health minister.
Chartthaipattanakla, a party led by a former finance minister, has called for replacing the National Credit Bureau's debtor list with a formal credit scoring system. The Bank of Thailand and commercial banks have opposed the proposal, arguing it would undermine the credibility of the Thai banking system and make it harder to make loans.
The debt burden on individuals factored into the central bank's hesitance last year to raise interest rates in line with the U.S. Federal Reserve and neighboring countries. The bank finally bowed to inflation in August, and the policy rate now stands at 1.5% after four rate hikes.
The policy change will increase the burdens on borrowers of limited means who have taken on floating-rate loans, said Thitima Chucherd, head of economic and financial market research at SCB Economic Intelligence Center. "Although the impact of interest rate hikes may be limited to some certain types of debt, a higher debt burden could make those low-income households become more vulnerable."
Since 2017, the central bank has been working with lenders to restructure consumer debts of up to 2 million baht. More than 30,000 debtors with a combined 6.85 billion baht in principal were in the program as of August.
One of those participants, Mam, a single mother in northern Thailand, said she found herself struggling with debt since she shut down her part-time flea-market business four years ago after having a child. She owed money on her business credit card, a personal loan from her employer on another job and on loans for two cars, both of which were eventually seized.
Last year, she applied to the Bank of Thailand's debt mediation program. The clinic took on 60% of her 163,000 baht credit-card debt and reduced her monthly payment to 750 baht. "I used to feel that I had nowhere to turn, but I decided to participate in the debt clinic," Mam said.
Monitoring Thailand's consumer debt burden is tricky for the central bank because the commercial banks it oversees only account for 43% of household loans. The rest are made by other kinds of financial companies, such as specialized lenders and savings cooperatives.
The impact on banks depends on their customer mix. Profits at Bangkok Bank, the largest Thai bank by assets, rose 10.6% last year, reflecting strong returns from corporate customers. By contrast, Thailand's second-largest bank, Kasikornbank, which lends mainly to consumers and smaller businesses, reported a 6% fall in profits in 2022 as provisions for bad loans increased 28.73% to 51.9 billion baht.
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Re: Thai pandemic borrowing binge prompts calls for repayment delays
Extend and pretend.
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