Low interest rates, poor wages and easy credit access have created an ingrained culture of borrowing
A woman speaks on a smart phone as she walks along railway tracks in a slum area in downtown Bangkok last month (AFP Photo/Christophe Archambault)
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 AFP from his modest family home on the outskirts of Bangkok.
"Each month, 30 to 40 percent of my salary goes solely towards repaying the interest on my loans," he adds.
Thai households are among the region'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 last May promising to end a near-decade of political turmoil and restore zip to Thailand's once-dynamic economy.
The country narrowly avoided recession during protests against the ousted administration of 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 few with fourth quarter GDP figures, to be released on Monday, expected to come in at around 0.8 percent for 2014.
There is some good news, with tourism arrivals bouncing back despite martial law, and exports — which account for around 60 percent of the economy — showing a slight improvement.
Yet two key Thai commodities — rice and rubber — are currently at record low prices and the country is flirting with deflation.
And with the political outlook still uncertain, consumer confidence remains depressed as Thais hold off from buying flats, cars and durables.
Dangerous debt levels
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," said Krystal Tan, an analyst with Capital Economics.
Low interest rates and widespread access to credit through banks and illegal loans have led to a deeply ingrained culture of borrowing over the past decade.
But policies by the previous government — including a huge tax rebate scheme for first-time car buyers — have also encouraged millions to take out loans that they are now struggling to repay.
The debt ratio is worrying the junta, which has pushed back the timeline for a restoration of democracy until 2016 and pegged its legitimacy to steering an economic revival.
"Please refrain from racking up debts," junta leader Prayut Chan-o-cha told viewers in a recent edition of his weekly televised address, warning mounting bills "may slow down the country's progress."
Non's family is typical of those living beyond their means.
In 2011, the region was hit by huge floods that destroyed their fridge, television and furniture.
Non borrowed to replace those items, partly from his bank, but mostly from illegal loan sharks who charge interest rates of between 10 and 20 percent.
He just about managed his debts until the factory cut his hours as the economy slumped.
Now, he needs to find 20,000 baht (US$610) each month to pay his bills. But his salary brings him just 14,000 baht. So the debts keep mounting.
It is a story all too familiar to Suthila Leenkam from a local non-governmental organization the Arom Pongpangan Foundation.
"The debt situation is getting worse," she says. "It leads to more family problems and to more divorces because people are in debt," she said.
Spend, spend, spend
Analysts tip the government to spend its way out of trouble, despite a 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 of dollars on much-needed infrastructure projects.
But the money is yet to kick into the economy.
As Barclays Capital put it 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, the finance minister said he had been told by Prayut to aim for at least 4.0 percent GDP growth this year.
But the World Bank says growth will only hit 3.5 percent in 2015 and 4.0 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," said Narong Petprasert, an economics professor at the University of Bangkok. AFP
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