The National Economic and Social Development Council (NESDC), the state planning unit, has urged financial institutions to adopt proactive policies in restructuring real estate loans following a sharp rise in the rate of non-performing loans (NPLs) for this type of credit.
The NESDC, which on Monday reported social conditions in the first quarter of this year, said the NPL situation for housing loans in the fourth quarter of 2023 had increased to 12.4% year-on-year, up from just 2.4% in the third quarter of 2023. Overall, the NPL rate for real estate loans accounted for 3.34% of total loans in the fourth quarter of 2023.
"The commercial banks should urgently improve the debt structure of these loans. This effort should not be limited to promoting debt restructuring but should also proactively involve inviting debtors to negotiate their debt restructuring, especially those with debts under 3 million baht. A home is considered stability in people's lives, and a lack of housing can lead to other social problems," said Danucha Pichayanan, secretary-general of the NESDC.
According to Mr Danucha, the issue with real estate loans is partly due to higher interest rates, which increase people's expenses and reduce their net income. Therefore, commercial banks should adjust the debt structure for these customers to better match their income, he noted.
Additionally, he said the NPL problem concerning real estate loans is also due to the current economic situation, which affects people's income and increases their other debt burdens.
Mr Danucha also discussed the overall household debt in the country, noting that in the fourth quarter of last year, total household debt tallied 16.3 trillion baht, accounting for 91.3% of GDP.
The increase in household debt is partly due to housing loans, particularly following the government's support for homeownership under the first-home scheme, which was initiated when the economy was still growing well. However, the Thai economy now faces structural economic issues.
Moreover, the NESDC chief mentioned that bad debt in credit card loans has also increased. In the fourth quarter of last year, the rate grew by 17.5% compared to the same period in the previous year, a higher growth rate than the 13.6% growth in the third quarter of 2023.
NPLs for credit cards accounted for 3.57% of total loans.
According to Mr Danucha, the NESDC has consistently issued warnings about the problem of bad debt in credit card loans. This issue is not only related to spending discipline but also to the market's ecosystem which adopts marketing strategies to increase sales by allowing customers to make purchases using instalment plans via credit cards. Customers are even offered discounts from stores when they choose to pay in instalments, a condition set by the credit card issuers.
He provided an example, explaining that nowadays even purchases of just 2,000 to 3,000 baht made with a credit card can be paid in instalments. This increases consumer demand while causing them to forget their actual income, leading to a decrease in their net monthly income available for expenses. When income falls short of expenses, people incur additional debts, creating a vicious cycle, he said.
In a related development, the NESDC on Monday reported the employment and unemployment rates in the first quarter of this year, with 39.6 million employed individuals, a decrease of 0.1% compared to the same period last year. This decline is due to a 5.7% reduction in agricultural employment during the off-season.
Meanwhile, employment in the non-agricultural sectors grew by 2.2%, with the hotel and restaurant industry continuing to expand by 10.6% year-on-year, driven by the arrival of over 9.3 million foreign tourists for the quarter. Similarly, employment in the construction sector grew by more than 5.0%.
Overall, Thailand's unemployment rate remained stable at 1.01% of the total workforce, with 410,000 jobless individuals.