The average level of household debt hit a record high at the end of June at Bt219,158 per family, surging 16 per cent year on year, blamed on the slow recovery of the economy and a rising cost of living, according to a survey by the University of the Thai
The poll of 1,200 respondents found that 75 per cent were indebted, against 65 per cent in last year’s survey. It also indicated that household debt has been rising steadily for the past nine years, since a similar survey in 2006. Last year, debt per household was found to be Bt188,774.
This year, monthly debt-servicing costs average Bt13,358, according to the poll. Of this, 50.9 per cent goes to financial institutions and 49.1 to underground loan providers.
The poll also found than 40 per cent of respondents only had debts in the financial system, while 37.2 per cent resorted to underground loans, and 22.8 per cent had a mixture of debts with financial institutions and loan sharks. According to the central bank, total household debt currently accounts for 80 per cent of gross domestic product.
"Rising household debt is a worrisome factor, but is not highly influential on the economic structure," said Thanavath Phonvichai, director of the UTCC’s Economic and Business Forecasting Centre. "Indebtedness has gone up because people, particularly low-income people earning less than Bt10,000 per month, are unable to meet their daily expenses, while the financial institutions have tightened lending amid a slow economic recovery."
The figures clearly indicate that people are having serious cash-flow problems mainly because their incomes are not keeping pace with the rising cost of living, he explained.
Other factors contributing to higher debt are schooling costs, overspending on daily living necessities, natural disasters, overspending on credit cards, and delayed government payments to farmers under the former pledging project.
He said rising debts in the household sector showed that the increase last year in the minimum wage to Bt300 per day was inadequate. People feel that the cost of living has risen faster than their incomes.
Thanavath said the household-debt situation could improve in the next six months if the government urgently stimulates economic growth by starting many investment projects. These would provide jobs for a wide range of income groups.
The military’s ruling National Council for Peace and Order should also help solve the problem of loan-sharking and stabilise the exchange rate, he said.
He added that if the economy has recovered to at least 4.5-per-cent annualised growth by next year, the planned rise of the VAT (value-added tax) rate to 10 per cent in October 2015 should not have much impact on consumers. However, the centre will need to monitor whether the VAT hike affects consumers and household spending.