Thai think tank urges cautious approach by govt to debt relief

The government needs to develop more practical strategies to improve business competitiveness while managing the national debt relief programme, according to the Center for Economic and Business Forecasting at the University of the Thai Chamber of Commerce.

Its remarks followed a day after the Thai government launched a comprehensive debt relief initiative aimed at alleviating household financial pressures and revitalising the national economy, with various experts calling for careful implementation of supportive economic measures.

Prime Minister Paetongtarn Shinawatra's Cabinet has approved an ambitious debt solutions programme titled "You Fight, We Help", targeting retail debtors, homeowners, car owners, and small businesses facing significant financial challenges. The initiative seeks to assist 1.9 million debtors with a combined debt of approximately 890 billion baht.

Thanawat Polvichai, president of the College of Thai Chamber of Commerce and Chairman of the Economic and Business Forecasting Center, highlighted significant reservations about the current economic stimulus strategies.

"The debt suspension is only a temporary measure," he warned. "What will happen is that if the debtor is already tense, he will not be able to move, so the debt suspension will stop the debt but the business cannot continue."

The centre emphasised the need for more comprehensive credit measures beyond simple debt moratorium.

Polvichai specifically urged the government to develop more nuanced approaches that address the underlying economic challenges facing Thai businesses.

Of particular concern was the proposed nationwide minimum wage increase to 400 baht. The economic experts cautioned that such a blanket policy could potentially harm small businesses in different provinces, which have varying economic dynamics and cost structures.

"We should consider the context of each province while listening to the local conditions," Thanawat explained. He warned that indiscriminate wage increases could lead to increased consumer prices and potentially undermine the government's efforts to resolve the household debt crisis.

Despite these concerns, the centre acknowledged the potential positive aspects of the government's current initiatives. He estimated that the three main economic measures could generate between 160 billion and 180 billion baht in economic circulation during the first half of 2025.

He explained that the programme comprises three primary economic stimulus strategies. First, a 10,000 baht distribution for elderly citizens is expected to inject around 40 billion baht into the economy. Second, the "You Fight, We Help" measure includes a three-year interest payment moratorium and debt restructuring options, with registration open from December 12-28.

Polvichai explained: "This will allow 1.9 million borrowers with a credit limit of about 900 billion baht to pay off their outstanding debts quickly. As a result, household debt has decreased by at least hundreds of billions of baht."

The third measure involves providing 1,000 baht per farm, expected to circulate approximately 40 billion baht into the economic system.

Overall, he estimated that the initiative could reduce the debt-to-GDP ratio from 89.6% to 87% in the coming year. The government's intervention is estimated to cost approximately 72 billion baht, with commercial banks potentially benefiting from interest and principal savings of 80 billion to 100 billion baht.

Despite the optimistic projections, economic experts have raised concerns about potential complications. Thanawat noted that while the GDP is expected to grow by about 3%, challenges remain. "Trump's policy to wage a trade war and raise taxes by 10% will result in around 160 billion baht of money disappearing from the system," he warned.

The expert emphasised the need for continuous and nuanced economic support. 

"Strong competitiveness will help businesses maintain their employment capacity, which will ultimately strengthen Thai spending," he said.

The think tank's primary recommendation is clear: the government must develop more practical, targeted measures to enhance Thai businesses' competitiveness while maintaining economic stability.

The centre's analysis comes with a crucial caveat that acknowledges their perspective does not take potential complications arising from global trade tensions and geopolitical uncertainties into account.