| IN BRIEF
|
Thailand is taking significant initiatives to reduce the burden of household debt, a problem that persists and has been exacerbated by the Covid-19 crisis. Faced with a household debt rate reaching almost 90% of GDP, the government has approved new measures aimed at supporting individuals and small businesses. These decisions are crucial to helping those experiencing financial difficulties manage their obligations and improve their economic situation.
Faced with a worrying economic situation, marked by household debt levels reaching 89.6% of GDP, Thailand recently approved a set of measures aimed at supporting overindebted individuals and small businesses. With initiatives including suspending interest payments and reducing principal installment payments, the Thai government is seeking to ease the financial burden on much of the population. These measures are also intended to be a remedy for the persistence of the household crisis after the Covid-19 pandemic.
Measures approved by the Thai cabinet
Thailand’s cabinet, made up of top government ministers, has agreed to a plan that includes the possibility of temporarily suspending interest payments as well as a reduction in installment payments for struggling borrowers. According to the Minister of Finance, Pichai Chunhavajira, these strategies should allow banks to better support their customers, while reducing the financial obligations weighing on them.
Impact on bank contributions
To optimize the effectiveness of these measures, the government has also decided to halve the annual contribution of banks to the Financial Institutions Development Fund (FIDF) for a period of three years. This contribution, initially 0.46% of bank deposits, will be reduced to 0.23%. This action is strategic, because it aims to give banks more room to maneuver to help their debtors. By reducing their charges, banking establishments can better meet the needs of their over-indebted customers.
The groups targeted by these initiatives
The new measures primarily target borrowers whose debts are one year or less overdue, encompassing various types of loans. Home loans are affected up to 5 million baht (or around 140,000 euros), while car loans are limited to 800,000 baht (22,500 euros). Small businesses can also benefit from this aid plan, with a ceiling set at 5 million baht. These efforts are essential for millions of Thais affected by the economic crisis caused by the pandemic.
Economic context and challenges to face
Thailand’s household debt ratio is seen as a serious threat to the national economy, with some economists calling it a time bomb. In recent years, banks have tightened their lending standards, and the Bank of Thailand has imposed high interest rates to maintain economic stability. These measures, although essential for long-term economic health, have a negative impact on consumption in the short term.
Conclusion on the fight against debt
With the level of household debt reaching 16.3 trillion baht (458 billion euros) and the country placing constant efforts to reduce the ratio of household debt to GDP to 80%, Thailand is at the crossroads. The measures undertaken by the government aim to make financial discipline more accessible, while directly supporting households and small businesses in an uncertain economic climate. Despite the difficulties, all these initiatives seem to be part of a desire to revive the national growth dynamic and cushion the impacts of the current economic crisis.
For further information regarding the household situation in Thailand, you can consult articles on This page Or This one.
Thailand’s initiatives to ease household debt burden
- Suspension of interest payments : Implementation of a possible suspension of interest payments for overindebted individuals and small businesses.
- Reduction of installment payments : Providing assistance through the reduction of main installment payments to ease pressure on borrowers.
- Reduced bank contributions : Decrease in the annual contribution of banks to the Financial Institutions Development Fund (FIDF) from 0.46% to 0.23%.
- Support for borrowers : Targeted assistance for borrowers with outstanding debts of one year or less, including home and auto loans.
- Specific borrowing amounts : Financial assistance for home loans up to 5 million baht and car loans up to 800,000 baht.
- Restructuring plans : Introduction of debt restructuring programs to help households in financial crisis.
- High debt rate : Observation of a household debt rate corresponding to 89.6% of GDP, one of the highest in Asia.
FAQs on new initiatives in Thailand to ease household debt burden
What are the new measures approved by the Thai government? The Thai government has approved measures including a possible suspension of interest payments and a reduction in installment payments to help over-indebted individuals and small businesses.
Who benefits from these measures? These initiatives target borrowers whose debts are overdue for one year or less, including home loans up to 5 million baht, car loans not exceeding 800,000 baht, and small business loans up to 5 million baht. baht.
What impact will the reduction in the banks’ contribution to the FIDF have? Halving the annual contribution of banks to the Financial Institutions Development Fund (FIDF) will allow banks to have more flexibility to support their debtors.
What is the current level of household debt in Thailand? At the end of the first half, Thailand’s household debt ratio was 89.6 percent of GDP, representing a total amount of 16.3 trillion baht.
Why is the debt situation worrying for the Thai economy? High household debt is considered a time bomb for the economy. Eligibility criteria for loans have been tightened by banks, and the central bank has maintained high interest rates to counter the risks associated with this situation.
How do these measures affect consumption in the short term? Although these measures are considered necessary for long-term economic health, they constitute a temporary brake on consumption in the immediate future.