Bank of Thailand Reports Non-Performing Loans Hit Highest Rate in Asia

Thailand ranks first among ASEAN countries in terms of vulnerable debtors and non-performing loans is seeking debt relief from the Central Bank. According to statistics from a credit rating agency, Thai borrowers who participate in the central bank’s debt relief programmes account for 11% of all borrowers, the highest proportion compared to a range of 1-5% in Indonesia, Malaysia, India, and China.

The share in Australia and New Zealand is 1%, according to Suwannee Jatsadasak, the Bank of Thailand’s associate governor in charge of supervision. According to the research, Thai debtors are more vulnerable than many other countries, as the epidemic had a significant influence on them.

Thailand’s household debt-to-GDP ratio has been high for some time, and the country’s economic recovery from the pandemic has been slower than its regional rivals.

“Thailand’s household debt-to-GDP tallied 90.9% in the third quarter of 2023, and the ratio is expected to increase to 91% in the fourth quarter due to higher growth of consumer loans than Thai economic growth,” she said.

Furthermore, the Bank of Thailand revealed on Monday that the whole banking industry’s non-performing loans (NPLs) in the fourth quarter of 2023 were 2.66%, a little reduction from 2.7% the previous quarter.

However, the NPL percentage for consumer loans grew to 2.88% in the fourth quarter of last year, up from 2.79% the previous quarter.

Non-Performing Loans increase

Consumer credit non-performing loans (NPLs) are increasing across all loan categories, particularly mortgage non-performing loans, which increased to 3.33% in the fourth quarter of 2023 from 3.24% the previous quarter.

Auto loan non-performing loans grew to 2.13% from 2.10%, while credit card NPLs increased to 3.57% from 3.34%. According to central bank data, the NPL ratio for personal loans has grown to 2.13% from 2.1%.

Ms Suwannee stated that rising non-performing loans in housing loans were primarily attributable to low-income borrowers earning less than 30,000 baht per month and acquiring a house for less than 3 million baht.

Furthermore, recent interest rate hikes have had an impact on borrowers’ ability to repay loans in the face of slow economic development.

A minimum retail rate (MRR) is charged on around 90% of all housing loans. However, in recent months, the MRR has climbed by fewer percentage points than the minimum loan rate and minimum overdraft rate, easing the financial strain on individual borrowers.

The central bank anticipates that non-performing loans for home loans will continue to rise in the first quarter of this year. However, the loan product’s higher bad debt would be attributed to borrowers of specialised financial institutions, and state-owned banks have implemented procedures to assist vulnerable borrowers, Ms Suwannee explained.

Furthermore, she stated that the Bank of Thailand would consult with the National Economic and Social Development Council after the state planning agency requested that the central bank cut the credit card debt minimum payment rate to 5%, down from 8% currently.

Thailand’s GDP Revised

Meanwhile, Thailand’s National Economic and Social Development Council (NESDC) has revised down GDP growth for 2023 and 2024 to 1.9% and 2.7%, respectively, indicating that the Bank of Thailand will utilise financial measures to assist the economy, according to secretary-general Danucha Pichayanan.

Yesterday, the NESDC announced the results of the 2023 economic expansion and its growth prediction for 2024, both of which were lower than its earlier forecasts of 2.5% and 2.7-3.7% (with an average of 3.2%).

Mr Danucha stated that in order to boost the economy and lessen the burden on individuals and small and medium-sized organisations (SMEs), the central bank should seriously consider lowering interest rates, particularly the net interest margin (NIM), which is now around 5%.

“In recent years, the government has implemented numerous stimulus measures to boost tourism, encourage investment, and accelerate the disbursement of the state budget. As a following stage, the government should use financial measures to boost the economy,” Mr Danucha stated.

The state planning agency wants financial institutions to lower the NIM to help SMEs and families manage their debt. Meanwhile, the NIM has no meaningful effect on huge corporations.

Mr Danucha stated that the central bank should extend its debt assistance measures by keeping the minimum payment rate for credit card debt at 5% for a period of time (it expired at the end of December last year) rather than the current rate of 8% to prevent non-performing loans (NPLs) among SMEs and households.

Public investment forecast to fall

Public investment and consumption fell 4.6% in 2023 compared to 2022, owing to a delay in the payout of the fiscal 2023 budget as a result of the general election.

Exports of products and services in 2023 increased by 2.1%, down from 6.1% in 2022. The value of exported goods in US dollars is predicted to fall by 1.7%, compared to a 5.4% increase in 2022. Import volumes decreased by 2.2%, compared to a 3.6% increase in 2022.

GDP growth in 2024 is predicted to range between 2.2 and 3.2%, with an average of 2.7%, thanks to a number of positive factors. Public investment is forecast to fall by 1.8%, while public consumption is expected to rise by 1.5%. Private investment and private consumption are expected to grow by 3.5% and 3%, respectively.

Government investment is predicted to be less negative, standing at -1.8%. Government consumption is up 1.5%, while private investment and consumption have grown by 3.5% and 3%, respectively.

Exports of products and services are forecast to increase by 5% in 2024, while export value in US dollars is expected to rise by 2.9%.

Import volumes will increase by 3% in 2024.

This year, the export industry will be a key driver of the economy, along with increased private investment. Meanwhile, low inflation and low unemployment continue to encourage domestic spending.

However, the Thai economy remains vulnerable in 2024 as a result of a seven-month delay in state budget preparation for fiscal 2024, rising household debt, particularly special mention (SM) vehicle loans, drought, global financial system volatility, and geopolitical concerns.

China’s economy continues to face internal challenges, particularly a liquidity shortage in the real estate industry, which may have an influence on Thailand’s export sector.