Table of Contents
- 1 Employment challenges persist
- 2 Response from the banking sector
- 3 Increase in non-performing loans
- 4 Concerns about informal debt
- 5 * Considering the rise of informal lending, what innovative solutions could address the underlying financial needs of vulnerable populations in Thailand while promoting responsible borrowing practices?
Thailand’s household debt ratio has fallen below 90% of GDP for the first time in three and a half years.
In a report on Thailand’s social conditions for the third quarter of 2024, National Economic and Social Development Council (NESDC) Secretary-General Danucha Pichayanan revealed:
“Household debt decreased to 89.6% of GDP in the second quarter, compared to 90.7% in the previous quarter. »
Total household debt stands at 16.32 trillion baht (449.1 billion euros), a lower growth rate of 1.3% compared to 2.3% in the previous quarter.
Employment challenges persist
Photo : Solidarity Center.
The employment situation remains stable, with around 40 million people employed, a slight decrease of 0.1% compared to the same quarter of 2023.
The unemployment rate increased slightly from 0.99% in the previous quarter to 1.02%, representing approximately 414,000 unemployed people.
The increase in long-term unemployment is particularly worrying, with 81,000 people out of work for more than a year, an increase of 16.2% compared to the previous year.
Among these people:
- 65% said they had difficulty finding a job;
- 71.3% had never worked before;
- Nearly three-quarters were aged 20 to 29.
See also: Thailand facing economic difficulties: massive layoffs
Response from the banking sector
Commercial banks have tightened their lending standards due to declining loan quality.
This led to the first contraction in household lending by commercial banks, which accounts for 38.5% of total household debt, down 1.2%.
Increase in non-performing loans
Credit quality continues to deteriorate, with non-performing loans (NLPs) reaching worrying levels:
- 9.6 million accounts are in default;
- The total value of NPLs exceeds 1.16 trillion baht (319 billion euros);
- The NPL ratio increased from 8.01% in the previous quarter to 8.48%;
- Auto loans and home loans are the biggest contributors to NPL growth.
Concerns about informal debt
The tightening of formal lending channels has raised fears that households will turn to informal loans or loan sharks.
See: How loan sharks make big profits at the expense of the poor in Thailand
A Household Economy Survey conducted in 2023 found that:
- Loan sharking totaled 67 billion baht (1.8 billion euros);
- 47.5% of informal loans were for daily consumption;
- Interest rates in the informal sector can reach 240% per year.
“To improve the household debt situation, we need targeted measures, especially for crucial debts related to life security, such as home loans, car loans and commercial loans,” said Mr. Danucha.
He added that new measures, including potential adjustments to contribution rates to the Financial Institutions Development Fund (FIDF), are expected to be announced soon.
See also:
Household debt in Thailand is a major concern
Thailand not worried about increasing public debt
Debt hell: Thai barmaid borrowed money from 14 loan sharks
Source : Khaosod English
* Considering the rise of informal lending, what innovative solutions could address the underlying financial needs of vulnerable populations in Thailand while promoting responsible borrowing practices?
## Open-Ended Questions for Discussion Based on the Article:
This article explores the complex issue of household debt in Thailand, focusing on recent trends and potential consequences. Here are some open-ended questions that can spark a lively discussion, encouraging diverse perspectives:
**Section 1: Understanding the Debt Landscape**
* What are the primary drivers behind the decrease in household debt in Thailand? Is this a positive sign for the economy, or are there underlying concerns?
* How do economic factors like inflation, interest rates, and employment opportunities contribute to household debt levels in Thailand?
**Section 2: Impact of Tightened Lending Standards**
* While shrinking household debt might seem beneficial, what are the potential consequences of tighter lending standards by commercial banks?
* How might these restrictions disproportionately affect certain demographics and create new vulnerabilities within society?
**Section 3: The Shadowy Realm of Informal Lending**
* The article highlights the rise of informal lending (“loan sharks”) as a consequence of tighter formal lending. What are the ethical implications of this trend, and how does it contribute to financial vulnerability?
* What can be done to address the root causes driving individuals towards informal lending options, beyond simply tightening formal lending standards?
**Section 4: Government Response and Future Outlook**
* The article mentions potential adjustments to the FIDF. What are some creative and effective measures the Thai government can take to tackle household debt and promote responsible financial practices?
* What role can financial literacy programs and consumer education play in mitigating the risks associated with both formal and informal borrowing?
**Section 5: Global Perspective**
* How does Thailand’s struggle with household debt compare to other countries facing similar challenges?
* What lessons can be learned from different national approaches to addressing household debt, and how can these insights be applied to the Thai context?
These questions aim to foster a nuanced discussion about the complexities of household debt in Thailand, exploring its economic, social, and ethical dimensions.
