Thailand bad consumer debt climbs to highest in 3 years in Q1

BANGKOK, NNA - Non-performing loans owed by households in Thailand climbed to the highest level in three years, official data showed, prompting the nation’s economic policy advisory body to call on the government to take action to curtail the burgeoning debt.

Key Points:

-- The office of the National Economic and Social Development Council said Thursday that total non-performing consumer loans rose 9.0 percent to 126.4 billion baht ($4.04 billion) in the first quarter of 2019.

-- Non-performing consumer debt accounted for 2.75 percent of total loans, and 27.8 percent of total non-performing loans.

-- NESDC said in a statement that there was a rush to obtain housing loans before stricter mortgage regulations took effect on April 1. There was also higher demand for cars following the annual international motor show in Bangkok and due to attractive debt repayment terms.

Takeaway:

-- NESDC said in the statement that increased household debt and a slowdown in the economy “may affect the ability to spend and the ability to pay debts of households which causes important issues to be closely monitored.”

-- Given uncertainty about the sustainability of household debt, “the government sector should pay more attention to various measures to supervise and control the lending to be more concise and appropriate,” NESDC said.

-- Hiromasa Matsuura, an analyst at Mizuho Research Institute, told NNA that the combined non-performing loans have not yet reached “a critical level,” adding that “the non-performing loan issue is not likely to have a material impact.”

-- Matsuura estimates that either a 1.0 percentage point fall in the proportion of the household debt to GDP or a 1.0 percentage point rise in the share of non-performing consumer loans to overall household debt could take roughly one full percentage point off household spending in the following quarters. Households are under pressure to borrow less and repay the debt, meaning there is less cash to spend, he explained.

-- Despite the recent slowdown in the domestic economy, the Bank of Thailand may be cautious about cutting rates to avoid a further rise in consumer debt.

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