Household debt at nine-year peak

Household debt is at a nine-year peak and the average family is in hock to the tune of 298,000 baht, with 62% of the debt formal and 38% informal, according to the University of the Thai Chamber of Commerce (UTCC).

Thanavath Phonvichai, director of UTCC's economic and business forecasting centre, said on Thursday the figures were based on a survey of around 1,200 people this month. 

The survey found that household debt rose 20% from about 248,000 baht per family last year. This was the fastest increase in eight years due to economic problems, and was in double figures for the fourth consecutive year.

A previous government policy of tax rebates for people buying their first automobiles had triggered the continuing double-digit increase in household debt, he said.

The percentage of informal debt dropped noticeably from 51% to 38%, the lowest proportion in eight years, thanks to lending by state-run banks to debtors, bringing them into the formal financial sector.

This relief measure would slow the pace of household debt, Mr Thanavath said. Formal debt was up from 49% to 62%.

The purchase of durable goods including houses and automobiles increased the debts of 19% of respondents; rising installments effected 18% of them; and the increased cost of living raised the debts of 13% of the surveyed people.

The percentage of people with debt payments exceeding income was 19%, down from 44% last year, and the percentage of people with income covering the debts rose to 60% from 20% last year.

Household debt accounted for 84% of the gross domestic product, but it was not a big concern because increasing debt came mostly from the purchase of houses and automobiles and from investment and, therefore, their debt was supported by collateral, Mr Thanavath said.

However, the circumstance could slow down economic recovery because banks would be more careful in lending and people would be reluctant to spend. As economic problems continued, household debt was likely to rise further, he said.

Given the level of household debt, the monthly repayment burden rose to 14,889 baht from 14,033 baht last year and 13,358 baht in 2014.