Thailand's cabinet has introduced measures to tackle high household debt, including suspending interest payments and reducing instalments for loans like housing, car, and small business debts. These steps, benefiting 1.9 million borrowers with debts worth $26.3 billion, aim to ease financial pressure and support economic recovery. The government also cut banks' contributions to the Financial Institutions Development Fund by half for three years, encouraging them to assist borrowers and curb bad loans. With household debt at 89.6% of GDP, officials project a 4% growth rate for late 2024, aided by stimulus measures. Plans for $29.5 billion in additional credit are underway to boost financial stability and promote sustainable growth.
Thailand's cabinet has approved debt support measures aimed at addressing household debt, including the suspension of interest payments and reduced principal instalments. These measures, designed to provide tangible and sustainable relief, will benefit retail borrowers and small businesses. The initiative was announced by Prime Minister Paetongtarn Shinawatra, who highlighted its importance in tackling debt-related challenges affecting consumption and economic growth.
At the end of June, Thailand's household debt was reported at 89.6% of GDP, amounting to 16.3 trillion THB (approximately 482 billion USD), among the highest levels in Asia. In response, measures targeting borrowers with debts overdue by up to one year were approved. These include housing loans of up to 5 million THB (148,060 USD), car loans of up to 800,000 THB, and loans for small businesses capped at 5 million THB. According to the central bank, approximately 1.9 million borrowers, representing debts worth 890 billion THB (26.3 billion USD), will benefit from these measures through reduced instalments and interest suspensions for three years.
The government's broader strategy includes alleviating the financial pressure on banks to enable better support for debtors. A reduced annual contribution to the Financial Institutions Development Fund (FIDF) was sanctioned, cutting the rate from 0.46% of deposits to 0.23% for three years. The FIDF, acting as the central bank's rescue arm, plays a pivotal role in providing financial assistance to struggling institutions. Finance Minister Pichai Chunhavajira indicated that this reduction would allow banks to extend further support to borrowers while potentially curbing the rise of non-performing loans.
Thailand's economic growth outlook was also addressed during the cabinet discussions. Officials project a 4% growth rate for the final quarter of 2024 and an annual growth rate of 2.8% for the year, compared to 1.9% in 2023. Finance Minister Pichai expressed optimism about next year's prospects, hoping for a growth rate of up to 3.5%, supported by government stimulus measures.
The central bank governor, Sethaput Suthiwartnarueput, described household debt as a long-standing structural issue. He stated that while the economy is expected to expand and income levels are gradually recovering, some borrowers continue to face challenges and require support to move forward. In line with this, Pichai announced plans to explore credit provisions totalling an additional 1 trillion THB (approximately 29.5 billion USD) through state-owned banks, citing ample liquidity in the financial system.
These measures reflect Thailand's commitment to addressing its debt challenges and fostering economic stability. The government's focus remains on providing immediate relief to borrowers while laying the groundwork for sustainable growth. As these initiatives take effect, the aim is to restore financial confidence among households and businesses, ensuring a balanced recovery that supports long-term economic development.
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