Household debt not a worry, FPO says

Last year, total personal income grew by 7.3 per cent, while consumer borrowing rose by 21.6 per cent, which showed that Thais had more debt than earnings. Debt was 0.82 times of personal income last year compared with 0.74 times in 2011.
Somchai Sujjapongse, director-general of the FPO, said there was no sign of a worrying trend on household debts. He cited respective data on household debt from the Office of the National Economic and Social Development Board and the Centre for Economic and Business Forecasting of the University of the Thai Chamber of Commerce as making the same conclusion. Clearly, its growth was on par with the economic trend. Also, there has been no sign of worrying levels of bad loans in this segment so far.
To make this situation clear to the Bank of Thailand, the office will hold a seminar on household debts where delegates from relevant organisations will share ideas and analyse the issue.
In 2012, the country’s total loans rose 15.3 per cent year on year. Of the total, commercial credit made up 74.2 per cent and its growth was 13.2 per cent. Consumer loans accounted for 25.8 per cent of the total, growing 21.6 per cent.
In the consumer-loan segment, credit for car and motorcycle leasing grew 33.9 per cent compared with 2011. The boost came from the government’s first-car policy to offer tax reductions. Consumer loans, excluding car and motorcycle leases, actually declined 17.4 per cent, while credit for property purchases grew 11.6 per cent.
The rate of non-performing loans was 2.3 per cent of accumulated loans. The NPL rate in the consumer segment was a low 0.5 per cent of total credit. Bad credit-card debt was also low, at 1.9 per cent. This reflected consumers’ financial potential for debt repayment. During the period, credit-card debt rose 14.3 per cent.
In February, the BIS ratio (capital adequacy as defined by the Bank for International Settlements) in the Thai banking system stood at 15.94 per cent, higher than the legal standard.
According to the National Statistical Office, in 2011 it found average household debt was Bt134,900. The ratio of debt against household earnings was at 5.8 times, down from 6.4 times in 2009.
Based on data from commercial banks and financial institutions such as saving cooperatives and other non-banks, the BOT published a report on household debts in the past four years. It found that such debts last year made up 77.7 per cent of gross domestic product, an increase from 61.4 per cent of GDP in 2009. Furthermore, household debt in the entire system was Bt8.81 trillion. As a result, debt per household was Bt439,490. By the end of last year, there were 20.06 million households in total.
An FPO study that utilised data from the BOT found that households had accumulated debts continuously. In 2011, household savings were 5.3 per cent of GDP, and 45 per cent of households, or 9.09 million, were not capable accumulating savings.