Household debt is a time bomb, warns Palang Pracharath’s Narumon
Household debt is a ticking time bomb for Thailand’s economy and everyone must tackle the problem urgently, Palang Pracharath accountant Narumon Pinyosinwat said on Wednesday.
She pointed out that Thailand’s household debt to gross domestic product has risen to 90.1 per cent, the 12th highest among 70 countries worldwide and the second most in Asia.
The country’s debt service ratio has hit 34 per cent, she warned.
“This proves household debt is obstructing consumption and economic recovery instead of stimulating consumption,” she said.
Narumon said the Bank of Thailand’s move to raise the interest rate to 0.75 per cent coupled with the high cost of living would cause household debt to increase and affect the repayment potential.
She advised lenders to pay attention to the debt repayment potential of borrowers as household debt came from banks, savings cooperatives, hire purchase and leasing firms, as well as loan sharks.
“Lenders must grant loans responsibly and not just concentrate on interests or collateral value,” she advised.
Many borrowers don’t fully understand the interest mechanism until they suffer from debt burden or even lose their homes, Narumon said.
Borrowers must possess basic financial literacy and be able to draw up easy repayment/financial plans on how much they can borrow, so they will not suffer from an overwhelming debt burden in the future, she said.
The government shouldn’t use state banks to grant loans with low interest rates as this would encourage households to borrow more money.
“The government would gain political benefits in the short term, but it will cause trouble for citizens and the economy in the long term," she said.
Government and private sectors must cooperate to boost public income, Narumon said.
She also advised the honing of skills among 10 per cent of labourers in the agriculture sector before moving them to industries, which would enable the workers to generate more income.
“Meanwhile, government and private sectors must come out with innovations to boost agriculture sector revenue,” she said.
“Most importantly, they must develop worker skills to meet labour market demand.”
There are many ways to tackle informal and household debt, including debt restructuring, Narumon added.
“Everyone must help combat household debt together before it’s too late,” she warned.
