Thailand unveils measures to trim US$469 billion household debt

THAILAND’S central bank unveiled a series of measures to start its long-term battle against almost 16 trillion baht (S$617.5 billion) of household debt, a hindrance to the nation’s economic growth.

The Bank of Thailand will start implementing some measures from next year, while other more complicated steps such as risk-based pricing and using debt-service ratio to assess borrowers will likely become effective much later, Deputy Governor Ronadol Numnonda said.

“The most important thing is adjusting the behaviour of both lenders and borrowers to ensure we have good quality of debts and to bring down the debt level over the long term,” Ronadol said in a news briefing on Friday (Jul 21). “We can’t use strong measures to quickly drag the debt level down, as it will have a negative impact” on the economy.

The central bank aims to gradually bring down household debt to 80 per cent of gross domestic product from about 90.6 per cent – the highest among major Asian economies. It is accelerating efforts to rein in debt as interest rates rise to eight-year high, raising default risks for economically sensitive groups amid an uneven economic recovery.

About a third of the people in South-east Asia’s second-largest economy owe a total of 15.96 trillion baht to formal lenders and an estimated 1 trillion baht borrowed from loan sharks. BLOOMBERG