The economic lockdown brought about by the COVID-19 pandemic has driven many people across the nation jobless. With no source of income, both private individuals and businesses have taken to incurring debt in order to keep afloat.
After 7 months of sustained zero or nearly zero income, household debts in Thailand have ballooned and are now equal to nearly 84% of the country’s gross domestic product.
This is according to the governor of the Bank of Thailand, Sethaput Suthiwartnarueput.
Specifically, Mr. Sethaput said that Thai households have incurred debts that, when combined together, have totaled THB13.58 trillion in the second quarter of 2020 alone. This period represents the months of April to June, when the lockdown on international travel was in place to contain the COVID-19 pandemic.
By comparison, household debts at the end of 2019 were at THB13.49 trillion or 80% of the gross domestic product.
Mr. Sethaput points out that many Thai families have already been indebted even before the pandemic, but the loss of income or the diminished income brought by the lockdown worsened the state of household debts in the Kingdom.
“COVID-19 further weakens the financial status of Thai people due to their reduced working hours and layoffs,” he said.
He promised that the BoT will work with the private sector for assistance, but said that it will “not be across the board.”
As household debts rise and with many people not recovering their sources of income, many of these debtors have reportedly disconnected from their creditors. As a result, a huge chunk of these debts are now non-functioning as the people who owe these liabilities have walked away from these obligations.
Reports indicate that 6% of those debtors that have availed of the government’s debt moratorium measures have broken contact with their debt issuers, effectively walking away with a total of THB100 billion of debt.
Despite pleas from the private sector to the contrary, the BoT has announced that it is not extending the debt repayment suspension beyond the October 22 deadline. This is to reportedly prevent a wider impact on the financial sector and to keep people from losing fiscal discipline.
The BoT did say that debtors who can present proof of inability to settle their obligations in this time of pandemic can enter negotiations with their banks.
To that end, 4% of debtors are currently entering into talks with their creditors. These people represent a total of THB40 billion in debt.
These news come as the new Finance Minister Arkhom Termpittayapaisith said that banks could declare a new debt repayment moratorium that will give debtors up until March 2021 to recover their finances enough to settle their obligations.
To stimulate the economy by boosting consumer spending, the government has yesterday initiated the Shop and Payback tax rebate scheme.
This scheme is open to non-welfare card holders, who can avail of up to THB30,000 in tax deductions for their purchase of essential goods and services.
The tax rebates are applicable for purchases made with operators who are VAT-registered as well as vendors who issue tax invoices. Only purchases made since yesterday and until December 31 can enjoy the tax deductions.