Thai Households Struggle With Record Debt, COVID-19 Increases Burden By Reuters

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By Orathai Sriring and Satawasin Staporncharnchai BANGKOK (Reuters) – Thai farmer Jamras Kongchai is struggling to pay off a 500,000 baht ($ 16,082) debt as the money from the sale of her crops is not enough to make payments. In addition to the stress, the coronavirus outbreak has shut down a small construction business where he worked for $ 10 a day to earn much-needed additional income. “I am deeply in debt and I don’t know what to do,” said the 51-year-old single mother of two, who traveled from the northern province of Kamphaeng Phet to join a demonstration of indebted rice farmers in Bangkok. last month, asking the government to help them reduce their debt burden. It has never repaid only part of the interest since 2013 and has not made a dent in the beginning. This year he has to pay 40,000 baht of interest, but he has no money. “I hope to get help.” Such protests have put further pressure on the Thai government, which is already grappling with growing pro-democracy protests and struggling to revive the pandemic-hit economy. Thai households are among the largest borrowers in Asia, racking up a mountain of 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 are finding it increasingly difficult to keep up with payments. The level of household debt is the highest since the central bank began keeping records in 2003. High debt also poses a risk to financial stability and restricts consumer spending in Southeast Asia’s second-largest economy , preventing a recovery from the coronavirus crisis. The economy suffered its deepest slump in more than two decades last year when exports contracted and the vital tourism sector reeling from the absence of foreign visitors. The new outbreaks of COVID-19 have added to the pressure on some businesses and households, the central bank said last month, when it lowered its outlook for gross domestic product (GDP) growth for 2021 to 3% from 3.2 %, and pointed out that the economy would not function again. pre-pandemic levels through mid-2022. While the latest outbreak of infections has largely been contained, it has reinforced fears that an economic rebound will be slow and uneven, prolonging the pain. “Even before COVID, our debt to GDP was already the highest among emerging markets,” said Yunyong Thaicharoen, chief economist at Siam Commercial Bank. “It is above a level that has a big impact on GDP and household spending,” he said, adding that the debt ratio could peak at 90-91% of GDP in the first quarter. The government has promised a trillion baht in relief to ease the impact of the outbreak, but some say the relief is not rolling out fast 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 days later. (GRAPH – Thailand Household Debt: https://fingfx.thomsonreuters.com/gfx/mkt/qmypmrzkxvr/Pasted%20image%201617360834059.png) MOUNTAIN DEBT The growing debt burden is likely to curb private consumption, which represents half of Thailand’s debt. $ 502 billion of GDP, and it will hurt lenders’ profits if more loans deteriorate. The pandemic certainly slowed down loan demand last year, but the economic downturn also made it harder for people to pay off their loans. Consumer loans rose 4.6% last year, slowing from a 7.5% increase in 2019 as the outbreak reduced the purchasing power of households, according to the central bank. But loans with a significant increase in credit risk soared, with auto loans reaching 9.5% of loans, the highest level in at least three years. Still, lender Muangthai Capital remains bullish, targeting 20-25% annual loan growth over the next four years. “The industry still has plenty of room to grow,” said Deputy Managing Director Parithad Petampai, noting that the company’s loans have multiplied by 10 to 70 billion baht last year since 2014. For years, easy credit for Consumers and businesses have sparked many warnings about the dangers of rising household debt in Thailand, and now the pandemic has put 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 could be left unemployed or underemployed, the central bank said in January. Even after the economy has recovered and more jobs are available, debt overhang will take a long time to deal with. “We can earn more, but that will go towards servicing the debt, there is not much left to spend,” said Aree Onkloi, 22, a worker from the northern province of Phitsanulok, whose family owes almost a million baht. “We will have to keep borrowing and never get out of it.”