Thread: Thai Gen Y caught in a debt trap

Amid mounting bad debts, Thai consumers are finding it increasingly difficult to obtain new loans as financial institutions have tightened criteria for new lending due to fear of rising non-performing loans (NPLs).


Total household debt in Thailand currently stands at a staggering 91 per cent of gross domestic product (GDP), totalling 16.4 trillion baht. Consumer loans account for 13.7 trillion baht of the total, or around 84 per cent of GDP.


The National Credit Bureau Co has revealed that bad debts in housing and auto loans and credit cards have been increasing at an alarming level.


As of the first quarter of this year, total NPLs rose to 1.09 trillion baht, up 14.9 per cent year on year (YoY).


Of the key areas of consumer bad debts: housing loans turning into bad debt amounted to 199.1 billion baht (up 18.2 per cent YoY); auto loan NPLs were 238.7 billion baht (up 32 per cent YoY); credit card bad debt amounted to 63.7 billion baht (up 14.6 per cent YoY), NPLs of personal loans were 236.9 billion baht (up 11.9 per cent YoY) and commercial loans (given to individuals) were 71.7 billion baht, increasing 13.4 per cent YoY.


Sluggish economic growth a key factor


The main reason for rising bad debt is the declining GDP growth rate, which was just 1.5 per cent in the first quarter of 2024, in keeping with the trend of sluggish growth in Thailand for several years, resulting in people’s income not keeping pace with the rising cost of living, resulting in debt.


“The annual economic growth rate is roughly around 3 per cent, while debt growth rate is 3.5 per cent,” said Surapol Opasatien, chief executive officer at the National Credit Bureau Co.


“Credit card debt is now the new time bomb,” he warned, saying it was alarming that many people could not make ends meet.


A consumer survey by SCB Economic Intelligence Center recently found that around 40 per cent of the respondents, whose income was less than 15,000 baht a month, incurred expenditure higher than their income. A half of the 40 per cent said it would take about three years for their income to match their expenses, while the other half said they would not be able to find adequate income in their lifetime.


To increase the income of workers, the government plans to increase the minimum daily wage to 400 baht nationwide in October from the current over 300 baht.


The wage rise is expected to increase the people’s buying power, but businesses have opposed the hike saying it would increase their production cost and reduce their competitiveness.


Newly appointed Finance Minister Pichai Chunhavajira plans to borrow 10 billion baht from a state-run bank.


The amount would be used to repay citizen debt, and the government would later compensate the Government Savings Bank.


He expected about 1 million borrowers to benefit from the initiative, most of them retail borrowers of Government Savings Bank.


Banks shy away from new loans


The increasing bad debt in consumer loans has made financial institutions wary, leading to higher loan application rejections. Several banks have rejected about 50-70 per cent of loan applications.


The impact on the property market in the first quarter of this year was severe, with just 72,954 residential units sold, the lowest in over 25 quarters.


Vichai Viratkapan, acting director-general of the Real Estate Information Center, blamed unfavorable economic conditions as one of the main factors affecting the housing market.


He was hopeful of the market improving in the second quarter, after the government launched a slew of measures in April to boost the market.


To ease the loan approval situation, the Government Housing Bank recently offered an attractive interest rate, while state-owned Krungthai Bank also offered mortgages at a low rate.


Gen Y and bad debts


Generation Y (those born between 1981 and 1996) has been the largest group going for mortgages, but new loans are declining in line with the recent report of the high rate of loan applications being rejected.


For example in 2018 before COVID-19, there were 430,000 new mortgage accounts, which dropped to 370,000 last year. The number of new accounts were only 59,000 in the first quarter this year, Surapol pointed out.


Gen Y, which is the working group population, has incurred high mortgage debt and they are struggling with bad debts and special mention loans.


Housing NPLs amounted to almost 200 billion baht. A part of the mortgages — special-mention loans on the brink of bad debt — totalled 186.6 billion, up 15 per cent YoY, an improvement on the 31 per cent up year on year in the fourth quarter.


The special-mention loans totalling 120 billion baht was in the balance sheet of state-run banks, according to Surapol.


The worrisome issue is the huge amount of bad debts and special mention loans that Gen Y owes. They include 83,281 housing loan contracts that have turned into NPLs, totalling 124 billion baht.


Gen Y also holds 76,276 special-mention loans totalling 118 billion baht.


“The bad debt owed by Gen Y accounts for over 50 per cent and special-mention loans represent the majority. How will they move on, given the slower economic growth?” Surapol said.

Thai Gen Y caught in a debt trap - Thai PBS World

In English, 28-43, better known as "Millennials".

It is the consequence of the Thai Chinese owned financial sector and their government’s policy of permitting workers earning a maximum monthly salary of 10,000-12,000 baht to sign debt contracts for mortgages and car loans that in average amount to repayments of 10,000 baht monthly. The banks and finance companies couldn’t give a fuck because they’d simply seize the property after three months of non payment and recycle it in the market leaving Somchai to cry over the interest he has paid over the years he could pay.

This huge debt crisis has not impinged on the baht’s value though. Why?

The fact is, the so-called minimum wage is not 10,000-12,000 baht per month but is, as I have said, in practice a maximum for most and applies to the majority of workers, around 30 million. Any upward pressure that should ensue from such a dreadful statistic is ameliorated by the Establishment’s acceptance of foreign labour, around 3 million, to work in areas undercutting indigenous rates.

The majority in this medieval pit of a country are of course doomed to an indentured life of wage slavery and cannot escape it.

Still, the profits for the sainted minority exploiting the peasants are huge and costs are held down.

Ghastly place really but with a largely stupid and docile peasant class it is difficult to see change.

^
Very informative. Thanks

^^In fact many 'right of centre' politicians are rather enthused by the idea. They see places like Singapore as 'the way ahead'.

Even with the quagmire the UK is in, the tory 'solution' includes tax cuts for the rich.

Originally Posted by Seekingasylum

It is the consequence of the Thai Chinese owned financial sector and their government’s policy of permitting workers earning a maximum monthly salary of 10,000-12,000 baht to sign debt contracts for mortgages and car loans that in average amount to repayments of 10,000 baht monthly. The banks and finance companies couldn’t give a fuck because they’d simply seize the property after three months of non payment and recycle it in the market leaving Somchai to cry over the interest he has paid over the years he could pay.

This huge debt crisis has not impinged on the baht’s value though. Why?

The fact is, the so-called minimum wage is not 10,000-12,000 baht per month but is, as I have said, in practice a maximum for most and applies to the majority of workers, around 30 million. Any upward pressure that should ensue from such a dreadful statistic is ameliorated by the Establishment’s acceptance of foreign labour, around 3 million, to work in areas undercutting indigenous rates.

The majority in this medieval pit of a country are of course doomed to an indentured life of wage slavery and cannot escape it.

Still, the profits for the sainted minority exploiting the peasants are huge and costs are held down.

Ghastly place really but with a largely stupid and docile peasant class it is difficult to see change.

Baht against the quid is the lowest since 2019, just got 46.68 off wise, so something is having an effect

I think it is also explained by an increase in Sterling against the USD, currently around $1.27. An increase which no doubt reflects the imminent demise of the worst British government in decades.

Originally Posted by Seekingasylum

I think it is also explained by an increase in Sterling against the USD, currently around $1.27. An increase which no doubt reflects the imminent demise of the worst British government in decades.

The rise of the Pound is the positive effects of Brexit taking effect

.....

I had assumed irony but then it could be simply a troll or possible plain old fashioned imbecility.