(Bangkok, 11th) Thailand's special mention loans saw significant growth in the fourth quarter of last year. The National Economic and Social Development Council aims to improve debt restructuring conditions to prevent these loans from deteriorating into non-performing loans.
Special mention loans are loans that are overdue for 30 to 90 days without repayment of the principal or interest. Non-performing loans are loans overdue for more than 90 days.
According to The Bangkok Post, Danucha, Secretary-General of the National Economic and Social Development Council, said at the social situation briefing for the first quarter of this year that the total household debt in the fourth quarter of last year increased by only 0.2% compared to the same period the previous year. The slowdown in growth is mainly due to tighter loan standards, especially in commercial banks. As a result, the ratio of household debt to GDP fell to 88.4%, slightly lower than the 88.9% in the third quarter of last year.
However, the quality of household credit has declined. According to data from the National Credit Bureau, the total amount of non-performing loans in the fourth quarter of last year was 1.22 trillion baht (about 48 billion SGD), accounting for 8.94% of total credit, slightly higher than the 8.78% in the previous quarter. The total amount of special mention loans was 568 billion baht, accounting for 4.17% of total household debt, up from 3.52% in the previous quarter.
Danucha also said that more than half of Thai workers have savings of less than six months' wages and tend to fall into a debt cycle due to over-consumption habits. According to a survey by Mahidol University last year, one-third of Thais like to buy luxury goods and spend on high-end services to enhance personal image and gain attention. Thai men are more concerned with social status and like to buy brand-name items and electronic products for show, while women prefer to buy food, beverages, cosmetics, skincare products, and fashionable clothing.
Danucha pointed out that the central bank has launched a "You Work Hard, We Help" debt relief program to assist Thais in preventing debt from deteriorating into non-performing loans. He believes there is a need to enhance public communication and encourage distressed borrowers to participate in the program. He also called for improvements in the terms of the program to help borrowers who show early signs of repayment difficulties resolve issues before their debt is classified as non-performing loans.
Increasing borrowing costs can help restrain consumer desires and alleviate debt consumption. However, one of the candidates for the new governor of the Bank of Thailand, Somprawin Manprasert, believes that due to dim economic prospects and stable inflation, the central bank should boldly cut borrowing costs in the future.
He told Bloomberg that the current benchmark interest rate is 1.75%, which can be reduced by 75 to 100 basis points. He also suggested that a rate cut could promote economic growth and ease the debt pressure on households and SMEs.
Somprawin's proposal aligns with the Pheu Thai Party government. The government led by Prime Minister Paetongtarn has repeatedly pressured the central bank to cut interest rates to stimulate economic growth. However, the outgoing governor, Sethaput, believes that the central bank has already lowered rates three times since October last year, totaling a 75 basis point cut, and that there is limited room to further ease the policy rate.
Special mention loans are loans that are overdue for 30 to 90 days without repayment of the principal or interest. Non-performing loans are loans overdue for more than 90 days.
According to The Bangkok Post, Danucha, Secretary-General of the National Economic and Social Development Council, said at the social situation briefing for the first quarter of this year that the total household debt in the fourth quarter of last year increased by only 0.2% compared to the same period the previous year. The slowdown in growth is mainly due to tighter loan standards, especially in commercial banks. As a result, the ratio of household debt to GDP fell to 88.4%, slightly lower than the 88.9% in the third quarter of last year.
However, the quality of household credit has declined. According to data from the National Credit Bureau, the total amount of non-performing loans in the fourth quarter of last year was 1.22 trillion baht (about 48 billion SGD), accounting for 8.94% of total credit, slightly higher than the 8.78% in the previous quarter. The total amount of special mention loans was 568 billion baht, accounting for 4.17% of total household debt, up from 3.52% in the previous quarter.
Danucha also said that more than half of Thai workers have savings of less than six months' wages and tend to fall into a debt cycle due to over-consumption habits. According to a survey by Mahidol University last year, one-third of Thais like to buy luxury goods and spend on high-end services to enhance personal image and gain attention. Thai men are more concerned with social status and like to buy brand-name items and electronic products for show, while women prefer to buy food, beverages, cosmetics, skincare products, and fashionable clothing.
Danucha pointed out that the central bank has launched a "You Work Hard, We Help" debt relief program to assist Thais in preventing debt from deteriorating into non-performing loans. He believes there is a need to enhance public communication and encourage distressed borrowers to participate in the program. He also called for improvements in the terms of the program to help borrowers who show early signs of repayment difficulties resolve issues before their debt is classified as non-performing loans.
Increasing borrowing costs can help restrain consumer desires and alleviate debt consumption. However, one of the candidates for the new governor of the Bank of Thailand, Somprawin Manprasert, believes that due to dim economic prospects and stable inflation, the central bank should boldly cut borrowing costs in the future.
He told Bloomberg that the current benchmark interest rate is 1.75%, which can be reduced by 75 to 100 basis points. He also suggested that a rate cut could promote economic growth and ease the debt pressure on households and SMEs.
Somprawin's proposal aligns with the Pheu Thai Party government. The government led by Prime Minister Paetongtarn has repeatedly pressured the central bank to cut interest rates to stimulate economic growth. However, the outgoing governor, Sethaput, believes that the central bank has already lowered rates three times since October last year, totaling a 75 basis point cut, and that there is limited room to further ease the policy rate.