Thailand should address its swelling household and public debt to sustain economic growth, says Paul Gambles, managing partner of the MBMG Group.
"Thailand acted after the 1997 Asian financial crisis, but there is a real danger that the country is falling into bad old habits as government debt is approaching 60% while consumer debt has reached 80%, and that is scary for future growth when these two things are happening side by side," he said.
There is less room for government manoeuvre when public debt reaches an appalling rate, while domestic consumption is hampered as consumers spend less because of their debt burden, Mr Gambles said.
Most of the euro-zone economies with a massive debt burden had recorded public debt below the 60% threshold, but the rise in private debt greatly contributed to how public debt skyrocketed, he said.
As of the first quarter, Thailand's household debt increased to 8.97 trillion baht or 77.5% of gross domestic product (GDP), compared with 1.36 trillion or 28.8% during the 1997 crisis.
The rate increased to 9.27 trillion or 79.2% of GDP in the second quarter.
Outstanding public debt as of Aug 31 totalled 5.30 trillion baht or 44.63% of GDP, according to Public Debt Management Office data.
The Thai economy will be largely influenced next year by the growth outlook of the US and Chinese economies, said Mr Gambles, adding that the only differences between Thailand and other developing economies are how to manage the current account deficit effectively and stimulate economic growth through the passage of infrastructure projects.
He said Thai economic growth could come in at 5% next year on the back of the 2-trillion-baht infrastructure investment plan despite obstacles to growth such as the rice-pledging scheme and swelling household debt.
However, high growth at an unsustainable level would not contribute to future economic well-being because the best way to sustain growth is to mitigate the debt problem, Mr Gambles said.
Steve Keen, a professor of economics and finance at the University of Western Sydney, said the Thai government might want to consider writing off consumer debt and shouldering a budget deficit for a while to soothe the impact of financial meddling.
"Given the scale of state policy on non-land-owning Thai farmers, there simply has to be a debt write-off or some form of debt-to-equity solution to reduce consumers' debt burden," he said.
Rising household debt generates concerns because the lowest end of the economic spectrum is shouldering a heavy debt burden, while there is no commercial monitoring as the records of government loans go into specialised financial institutions and the Finance Ministry, said Mr Gambles.