By Panarat Thepgumpanat and Orathai Sriring
BANGKOK, Oct 8 (Reuters) – Thai business owner Kavita Wongyakasem, 51, fears she may die before she has paid back all her debt.
The single mother of two owes 10 million baht ($298,000) to seven financial institutions and a further 2.1 million baht to informal lenders, up from a total 8 million baht three years ago when Reuters first interviewed her.
Crippling household debt is ringing alarm bells for Thailand’s economic growth ambitions at a time when inflationary pressures are also building. Average household debt across Thailand is at its highest in 18 years, stifling growth in an economy that has lagged regional peers.
“The business keeps losing 40,000 to 50,000 baht a month, so I have to find money to pay,” said Kavita, whose firm provides services for a major Thai energy company, tears running down her face.
“What else can I do to survive?” she added, explaining she used the loans to support her household and small business, including a mortgage on her 3 million baht home.
Next week, the annual meetings of the International Monetary Fund and the World Bank Group in Bangkok will bring together top financial officials from around the world for talks on the global economy, AI, climate change and other challenges.
The IMF and Thailand’s government said they planned to showcase the country’s economic transition to “new horizons,” drawing lessons from more than 35 years of economic development.
“This transition model could be a showcase and replicated to other countries in the region moving forward,” the IMF and Thailand said in a March statement.
But the Fund also warned of the risks from high household debt.
“High household debt could potentially impede structural transformation by constraining disposable household income and resources needed for investment in human capital,” the IMF said in a February staff report about Thailand.
Thailand’s household debt-to-GDP ratio stood at 85.2% at the end of June, among the highest in Asia.
‘VERY CONCERNED’
Rising costs of living driven by global shocks like the wars in Iran and Ukraine will be a major theme at the meetings.
Kavita said if it had not been for the broader economic malaise, she might have had money to pay down her debts or been able to avoid taking on new loans.
Thailand’s debt pile and its cascading impact through an economy that is forecast to grow only 2.3% this year remain a key vulnerability.
“We’re very concerned because this is one of the major structural problems for the Thai economy,” the Bank of Thailand’s assistant governor Don Nakornthab told Reuters.
“If we cannot solve the household debt problem, getting back to potential growth of 2.7% is probably very difficult.”
Household debt reflects not only economic hardship and weak income growth, but also the impact of easier access to digital credit, including buy-now-pay-later services, that some consumers might not fully understand, according to the central bank.
From only 620,000 in 2021, buy-now-pay-later accounts surged to 6.3 million last year, with loans rocketing from 6.8 billion baht to 40.7 billion baht during the period, prompting the central bank to regulate the sector.
Only about 5 million of Thailand’s 27 million borrowers are financially healthy and qualify to access additional credit, said former chief of the National Credit Bureau Surapol Opasatien, leaving millions at risk of falling into long-term debt distress and legal proceedings.
FALLING INCOME, RISING DEBT
Told about struggling debtors like Kavita, Thailand’s Finance Minister Ekniti Nitithanprapas pointed to the country’s rock-bottom interest rate of 1% and ongoing co-operation with the central bank and lenders to manage the issue.
“We need to make sure that household debt will be addressed by the rising income of the people,” he told Reuters, outlining a plan to hit 3% GDP growth within three years by drawing foreign investments into key sectors like semiconductors.
That’s still less than the 5% GDP growth Surapol estimates is required to bring Thailand’s household debt-to-GDP ratio to under 80% — a tipping point where negative debt effects intensify.
For Kavita, who has one daughter studying medicine and another in middle school, it is a daily fight to find enough money to keep her household running.
“I still don’t see the light at the end of the tunnel,” she said. “My life will probably end before the debts are fully repaid.”
($1 = 33.55 baht)
(Reporting by Panarat Thepgumpanat and Orathai Sriring; Writing by Devjyot Ghoshal; Editing by Kate Mayberry)
