Sinking in heavy repayments to loan sharks, Non says payday is nothing more than a cruel reminder of his dire finances.
Household debt has surged to alarming levels in Thailand; just one of a welter of issues dragging on the economy despite a vow by the ruling junta to revive the kingdom’s fortunes.
“I have more outgoings than income,” Non, a 37-year-old tire factory worker tells reporters from his modest family home on the outskirts of Bangkok. “Each month, 30 to 40 percent of my salary goes solely toward repaying the interest on my loans.”
Thai households are among Southeast Asia’s biggest borrowers, a credit binge stoked by populist policies and low bank interest rates — but also low wages that keep the poor perilously close to the breadline and make them ready bait for illegal loan sharks.
The debt levels are worrying the generals who seized power in May last year promising to end a near-decade of political turmoil and restore zip to Thailand’s once dynamic economy.
Thailand narrowly avoided recession during protests against the ousted administration of former Thai prime minister Yingluck Shinawatra, which paralyzed government spending and frightened off tourists and investors.
Nine months after the military power grab, signs of economic recovery are still scant. GDP figures for the fourth quarter of last year, to be released on Monday, are expected to come in at about 0.8 percent for last year.
There is some good news, with tourism arrivals bouncing back despite martial law, and exports — which account for about 60 percent of the economy — showing a slight improvement in recent months.
Yet two key Thai commodities — rice and rubber — are currently at record low prices and the country is flirting with deflation. Further, with the political outlook still uncertain, consumer confidence remains depressed as Thais hold off from buying apartments, cars and durable goods.
At the heart of that malaise lies Thailand’s eye-wateringly high household debt.
“Thailand has seen one of the sharpest surges in household debt in the region, with the debt-GDP ratio rising from 60 percent to 85 percent over the past five years,” Krystal Tan, an analyst with Capital Economics, told reporters.
Low interest rates and widespread access to credit through banks and illegal loans have fed borrowing over the past decade, but policies by the previous government — including a huge tax rebate program for first-time car buyers — have also encouraged millions to take out loans that they are now struggling to repay.
The debt ratio worries the junta, which has pushed back the restoration of democracy until next year and pegged its legitimacy to steering an economic revival.
“Please refrain from racking up debts,” Thai Prime Minister Prayuth Chan-ocha, the junta’s leader, told viewers in a recent edition of his weekly televised address, saying that mounting bills “may slow down the country’s progress.”
Non’s family is typical of those living struggling with debt. In 2011, the region was hit by huge floods that destroyed their refrigerator, television and furniture. Non borrowed to replace those items, partly from his bank, but mostly from loan sharks who charge interest rates from 10 to 20 percent.
He just about managed his debts until the tire factory cut his hours as the economy slumped.
Now, he needs to find 20,000 baht (US$612) each month to pay his bills, but his salary is just 14,000 baht. So the debts keep mounting.
It is a familiar story to Suthila Leenkam, who works with local non-governmental organization the Arom Pongpangan Foundation.
“The debt situation is getting worse,” she said. “It leads to more family problems and to more divorces because people are in debt,” she said.
Analysts urge the government to spend its way out of trouble, despite its vow to tighten the purse strings after what it says were years of profligacy from elected civilian governments.
The military has promised to unleash billions in spending on much-needed infrastructure projects. However, the money has yet to kick into the economy.
As Barclays Capital said in a note last month: “The main impediment to growth at present is the slow pace of fiscal spending, which is also delaying investment and consumption decisions.”
Earlier this month, Thailand’s minister of finance said he had been told by Prayuth to aim for at least 4 percent GDP growth this year.
However, the World Bank says that Thai economic growth would only hit 3.5 percent this year and 4 percent next year.
Already squeezed by months of bad economic news, those at the bottom of the ladder are hoping for an upturn in fortunes.
“Working class Thais, like vendors and workers, struggle to earn enough money and their incomes are no longer sufficient to cover their expenses,” University of Bangkok economics professor Narong Petprasert told reporters.
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