Rising household debt poses threat to economy

A UTCC poll this month showed household debt had surged 6.38 per cent to Bt2.6 trillion, due mainly to rising unemployment and people being unable to meet their daily expenses. Debt per household rose to Bt143,476 this year, from Bt135,166 last year.

Total household debt accounts for 27.88 per cent of gross domestic product (GDP), the highest proportion in five years.

Thanavath Phonvichai, director of the UTCC Economic and Business Forecasting Centre, said if household debt surged beyond 30 per cent of GDP, the economy would face greater difficulty recovering from the present crunch. More problems would follow, including more underground loans, increasing social problems and rising national debt.

"The figures clearly indicate Thais are having serious cash-flow problems amid the slowing economy, due to the fact that their incomes do not cover daily expenses," said Thanavath Phonvichai, director of the UTCC Economic and Business Forecasting Centre.

The nationwide survey of 1,202 respondents from February 18-23 showed people were borrowing more this year for daily living expenses, auto and house purchases and debt payments.

Yajai Chuwicha, head of the UTCC Chamber Business Poll, said people with monthly incomes of less than Bt30,000 had to borrow more than others, because their money could not cover their daily spending.

More people have started creating debt this year, with 58.4 per cent of poll respondents saying they had a debt burden, up from 45.7 per cent last year. More have also resorted to underground loans, 42.6 per cent, up from 35 per cent last year.

The university suggested the government create greater access to credit, distribute more money to the Village Funds scheme and set up a special unit to monitor underground loans, in order to solve the worsening debt problem.

To create more jobs across a wide range of income levels, the government must also stimulate mega-project spending, promote tourism growth within Asean and encourage cross-border trading.

Almost 67 per cent of respondents reported having trouble paying their debts each month, with an average monthly burden of Bt9,416, up from Bt8,315 last year.

Asked if the government's Bt2,000 handout to low-income people would effectively boost spending, most receivers said they would not change their spending habits. UTCC urged the government to come up with other measures to boost income other than injecting money into only a small group of people.