Economics
Thailand’s household debt reaches record high amid slow economic growth
Thailand’s household debt has surged to a record 606,378 baht per household, driven by slow economic growth and high living costs. A UTCC survey found 71.6% of households struggle to meet repayments. The government is working on measures to alleviate the burden.
Thailand’s household debt has soared to a record high, with many citizens struggling to manage loan repayments due to weak economic growth, declining incomes, and rising living costs, according to a recent survey.
The study, conducted by the University of the Thai Chamber of Commerce (UTCC) in early September, revealed an average household debt of 606,378 baht (S$23,600), marking an 8.4% increase from the previous year. This is the highest level of household debt recorded since the survey began in 2009.
The survey highlighted that 69.9% of this debt is attributed to formal lending, a decrease from 80.2% last year, while informal lending has risen to 30%. This shift is largely due to many individuals reaching their borrowing limits from formal financial institutions, forcing them to seek credit from informal sources such as loan sharks.
The study also noted that a significant number of households are facing difficulties meeting their financial obligations, with monthly debt payments averaging 18,787 baht, up from 16,742 baht the previous year. The delinquency rate stands at 71.6%.
The growing household debt is placing pressure on Thailand’s economy, the second largest in Southeast Asia, which is already grappling with high borrowing costs and sluggish exports amid a slow recovery in China, its main trading partner.
Both the government and the Bank of Thailand have raised concerns over the country’s total household debt, which reached 16.4 trillion baht, or 90.8% of gross domestic product (GDP), at the end of March 2024—one of the highest levels in Asia. The central bank has introduced measures aimed at reducing this ratio to 89% by next year.
For comparison, International Monetary Fund (IMF) data from 2022 shows household debt as a percentage of GDP at 67% in Malaysia and 48.6% in Singapore.
The UTCC survey, which polled 1,300 respondents from 1-7 September, found that the majority had experienced challenges repaying debt over the past year and expected to continue facing difficulties in the coming year.
UTCC President Thanavath Phonvichai expressed concern over the long-standing debt problem, stating that household debt is primarily incurred for daily expenses, housing, vehicles, and business operations, and does not necessarily undermine the overall economy. He added that the situation would improve once the domestic economy returns to strong growth.
In response to the debt crisis, the Federation of Thai Industries has reduced its 2024 target for domestic vehicle sales by 200,000 units to 550,000, citing high household debt and stricter lending conditions as key factors reducing demand.
Finance Minister Pichai Chunhavajira emphasized the urgency of addressing household debt and urged the Bank of Thailand to provide more support to retail borrowers. He also mentioned plans to engage with banks to explore further assistance measures for debtors.
Thailand’s newly appointed Prime Minister, Paetongtarn Shinawatra, has pledged to stimulate the economy immediately.
On Monday, the government announced plans to distribute 145 billion baht to state welfare cardholders starting next week.
This is part of a broader “digital wallet” program aimed at providing financial relief to up to 50 million people, although it now appears much of the support will be disbursed in cash.
AFP
Top rice supplier India bans some exports
India, the world’s largest rice exporter, bans non-basmati white rice exports to ensure domestic availability and tackle rising prices amid global food crises, potentially impacting rice-dependent nations.
MUMBAI, INDIA — The world’s biggest rice exporter India has banned some overseas sales of the grain “with immediate effect”, the government said, in a move that could drive international prices even higher.
Rice is a major world food staple and prices on international markets have soared to decade highs as the world grappled with the Covid pandemic, the war in Ukraine and the impact of the El Nino weather phenomenon on production levels.
India would ban exports of non-basmati white rice — which accounts for around a quarter of its total — the consumer affairs and food ministry said.
The move would “ensure adequate availability” and “allay the rise in prices in the domestic market”, it said in a statement late Thursday.
India accounts for more than 40 percent of all global rice shipments, so the decision could “risk exacerbating food insecurity in countries highly dependent on rice imports”, data analytics firm Gro Intelligence said in a note.
Countries expected to be hit by the ban include African nations, Turkey, Syria, and Pakistan — all of them already struggling with high food-price inflation — the firm added.
Global demand saw Indian exports of non-basmati white rice jump 35 percent year-on-year in the second quarter, the ministry said.
The increase came even after the government banned broken rice shipments and imposed a 20 percent export tax on white rice in September.
India exported 10.3 million tonnes of non-basmati white rice last year and Rabobank senior analyst Oscar Tjakra said alternative suppliers did not have spare capacity to fill the gap.
“Typically the major exporters are Thailand, Vietnam, and to some extent Pakistan and the US,” he told AFP. “They won’t have enough supply of rice to replace these.”
Moscow’s cancellation of the Black Sea grain deal that protected Ukrainian exports has already led to wheat prices creeping up, he pointed out.
“Obviously this will add to inflation around the world because rice can be used as a substitute for wheat.”
Rice prices in India rose 14-15 per cent in the year to March and the government “clearly viewed these as red lines from a domestic food security and inflation point of view”, rating agency Crisil’s research director Pushan Sharma said in a note.
India had already curbed exports of wheat and sugar last year to rein in prices.
— AFP
AFP
Chinese mortgage strikers despair as unfinished homes stay stalled
Chinese homebuyers are resorting to mortgage boycotts and protests against developers due to ongoing housing crisis, with little legal recourse and government sensitivity to the issue.
ZHENGZHOU, CHINA — Gao Zhuang says he has refused to pay his mortgage for months, a desperate protest against the Chinese property developer he blames for endless delays on the unfinished apartment he bought years ago for his son.
He is one of many victims of a long-running housing crisis still wreaking misery on the lives of homebuyers, many of whom have little legal recourse on what has become an ultra-sensitive subject for the government.
The 49-year-old labourer from central Henan bought an apartment in the provincial capital Zhengzhou for 1.2 million yuan (US$170,000) in 2019, and said he was told it would be completed in two years.
He staked much of his savings on the flat, hoping it would improve his son’s marriage prospects and allow his family to start leaving their poorer rural hometown behind.
But the developer announced delay after delay, and construction work ground to a virtual halt late last year.
“The main impact has been on my son,” said Gao, who requested his name be changed to avoid repercussions.
“How can he get married without his own place?”
Gao’s case is not uncommon.
A wave of mortgage boycotts spread nationwide last summer, as cash-strapped developers struggled to raise enough to complete homes they had already sold in advance — a common practice in China.
Endemic issues in the real estate sector had been brought to a head in 2020, when the government cracked down on excessive borrowing and rampant speculation.
Cut off from the easy money that had fuelled the boom of the last few decades, many companies began floundering under accumulated debts.
A slowing economy was hammered further by pandemic-era health curbs, adding to low consumer confidence and a slump in housing demand.
Beijing recently introduced a raft of measures intended to remedy the disarray in the sector.
Although some properties have since been completed, many buyers like Gao are still waiting — while other issues have surfaced, from slapdash building work to disputes over compensation and pressure from local officials.
‘I blame the government’
The property crisis grabbed headlines for its scale, notably entangling industry giant Evergrande, which flirted with bankruptcy before announcing a massive restructuring deal.
The smaller regional firm building Gao’s complex, Henan Jin’en Real Estate, is not publicly listed, making its financial situation hard to discern.
It did not reply to AFP’s requests for comment.
Disgruntled homeowners say the compound’s estimated 100 undelivered homes and shoddy finishes are evidence the company is struggling.
AFP journalists visiting in June observed crumbling exterior masonry, holes in interior walls, loose wiring and unsecured fire doors.
A handful of workers dug trenches and stacked cinder blocks on the site’s periphery, while the sound of drilling emanated from several homes.
Some buyers said the developer had hired a skeleton staff of labourers to justify a rumoured government bailout.
One owner said local officials seemed powerless to ensure the project’s completion, adding that “ordinary people have suffered the worst”.
“I don’t blame the developer — I blame the government,” the middle-aged man told AFP, gazing around the concrete shell of an apartment.
“Some people around here still believe in our government, but I think they’re the least worthy of our faith.”
‘Nothing I can do’
Gao told AFP he stopped paying his 5,000-yuan (US$700) monthly mortgage in January, joining a boycott with others from the complex.
He said his attempts to claim compensation for the delays from the developer had been unsuccessful.
“Their attitude has been, ‘If you don’t like it, sue us,'” Gao said.
“But they know that in China, people like us are rarely able to afford a lawsuit.”
For others, initial fury has given way to helplessness.
“There’s no point getting angry because there’s nothing I can do,” said 24-year-old homebuyer Wang, using a pseudonym.
The online store operator purchased a home in the wealthy eastern city of Ningbo for 690,000 yuan in 2021, but work stopped later that year.
When AFP visited the site, empty towerblock facades surrounded mounds of overturned earth and piping, with rusty vehicles parked chaotically among the rubble.
Around a dozen workers mooched among stone slabs and upturned trees waiting to be planted, roots drying out in the summer sun.
Wang said he had “no confidence” in the latest promise the property would be finished by August’s end.
“After this, I’ll never buy a house that isn’t finished already,” he said.
“And I won’t believe all the rhetoric the government and others come out with.”
Don’t speak out
China’s leadership has recently cut mortgage rates, slashed red tape and offered developers more loans in a bid to shore up the industry.
But analysts warn President Xi Jinping’s government has limited room for manoeuvre and could face further threats as debt distress spreads to state-owned developers and larger cities.
The prognosis for the sector, according to a June note from Japanese bank Nomura, “appears dire”.
For Beijing, the issue threatens one of its highest priorities — social stability.
Authorities in multiple regions have moved to stifle public complaints about unfinished homes in recent months, according to mortgage boycott participants contacted by AFP.
Both Gao and Wang said they had been contacted by local officials to dissuade them from petitioning the government or speaking to the media.
Multiple other buyers said they had received calls from the police, who they feared were also monitoring their private social media groups.
“There’s nothing I can say about this,” one initially receptive group administrator told AFP before abruptly breaking off contact.
“The state is controlling this too strictly right now.”
— AFP
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