Household debt hits a record high

The University of the Thai Chamber of Commerce (UTCC) recently announced that household debt in Thailand had risen to a new high, surging a whopping 12 per cent in the past 12 months.

The UTCC conducted a survey of 1,200 respondents across income groups and from this suggested that average household debt stood at slightly over 188,774 baht, which was up by 12 per cent from a 2012 survey. A survey which took place in 2009 showed average household debt at 147,542 baht, so in four years the average has risen by just over 27 per cent.

The period between 2012 and 2013 is the first time household debt has surged by double digit percentage points.

The most worrying aspect of this debt scenario centres, not unsurprisingly, on the lower income spectrum. As the UTCC researchers pointed out, low income earners are at the mercy of loan sharks.

In fact, according to the Bank of Thailand (BoT), household debt across the country stands at eight trillion baht. Of this, 3.8 trillion baht comes from commercial banks, 2 trillion from banks owned by the government, and one trillion from savings cooperatives.

This means a quite substantial 1.2 trillion baht is owed to loan sharks, and a large amount of this debt is borne by low income earners who are usually unaware of the extremely high percentage interest rates they are being burdened with at the outset of a loan.

In total, the eight trillion baht meant household debt had surged to 78 per cent of GDP, a figure that was up from 63 per cent in 2010 and 44 per cent a decade ago.

The UTCC says the latest surge could be attributed to the rise in the general cost of living, increases in education fees and the purchases of fixed assets such as homes and motor vehicles.

It was estimated that most homes have an average monthly debt repayment burden of 11,672 baht, of which almost 50 per cent is in the form of organized loans. In this area the surge in household debt is at 13.6 per cent more than the same period in 2012.

The survey noted that those earning 15,000 baht or more per month were not being impacted by any economic slowdown and were continuing to service their monthly credit card debt repayments.

The survey suggested the government needed to address the cost of living for low income earners.

The BoT said its concern over the increase in debt is the risk to financial stability. Having a double-digit growth in credit and household debt allied with downward growth in GDP since April this year posed a long term threat if it wasn’t addressed correctly.