Debt-ridden Thais unmoved by campaign promises as election nears

Like many other business owners, Kavita's boating company was hit when the pandemic brought the world to a halt. Commissioned to pull oil tug boats into ports, her business was affected when the number of the vessels plummeted during Covid-19 lockdowns, while her expenditures rose as she desperately tried to keep her staff of around 20 safes from the virus.

In order to pay salaries and run her household, the sole breadwinner for a family of five said she was forced to borrow from private lenders. It wasn't long before she was dragged into a spiral of debt as she scrambled to make payments for multiple expenses every month amid a rising cost of living, thereby sharply affecting her mental health.

"Don't ask whether I think about it (finances) every day, I think about it every single minute. Sometimes, it goes into my dreams and shakes me up. Some days I just can't face the morning. I don't want to wake up to the reality that we don't have any money," said Kavita, whose debt has raked up to approximately 8 million Thai baht ($236,000) and has no cash savings.

"It's very sorrowful sometimes, but I can't say anything about it. I don't talk to anyone in my family about the stresses I've been facing. I will stay in my home office and lie down, scrolling through my phone. People may think I go in to lay down and relax, but no, I go in there to suppress my own feelings. Sometimes, you just can't find the money," she said while wiping away tears.

Thailand has among the highest household debt to gross domestic product (GDP) ratios in Asia, behind South Korea and Japan, according to a Bank for International Settlements ranking. Millions of people, like Kavita, find themselves trapped in an endless debt cycle that the pandemic has further entrenched them in.

With one in every three Thais in debt, the problem has become a key issue in a May 14 general election and all major parties have promised wage increases or debt moratoriums, along with guarantee-free loans and handouts.

However, not everyone is convinced that these campaign promises would make their lives change for the better.

"It's like they lay out all these alluring traps but in the end, it does nothing to help us. Like, the Half-Half Co-Payment Scheme. Vendors were happy, we were happy. But today, vendors are being taxed even when they haven't even fully regained their income. It's like they planned this to kill us again," Kavita said, referring to a subsidy scheme undertaken by Prime Minister Prayuth Chan-o-cha's government.

The Half-Half Co-Payment Scheme was launched last year as part of a cost-of-living subsidy program to help stimulate the economy, in which the government helps to pay 50 % of people's purchases from small shops and eateries.

Achin Chunglog, president of the Foundation for Debtors' Rights Reform, who helps people across the country with debt rehabilitation said there is a recurring pattern in which people entrap themselves in debt cycles.

"Apart from the unforeseeable crisis, Thais lack the knowledge and wit in managing their finances. As they sign up for the loans, they do not read the contract and don't know what the legal implications are," said Achin, who has overseen around 3,000 cases in her 15-year career.

President of University of The Thai Chamber of Commerce (UTCC), Thanavath Phonvichai, said the nation's household debt to gross domestic product (GDP) ratio stood at 86% but expects the situation to improve.

"The high household debt rate means that it won't be easy to lay out future policies to stimulate consumption because people are busy paying off debts and asking the bank for loans," Thanavath told Reuters. "However, looking at the number, we forecast that things will get better because the household debt to GDP ratio was at 90 % from the time of Covid, since 2020, until now."

The numbers remained a cause for concern for the central bank. In February, it said household debt levels should be brought to below 80% of the GDP to help reduce economic and financial risks.

The debt binge starts early for many Thais and lasts through their lifetime, data showed. Some 58% of people aged between 25 to 29 years are already in debt, and a quarter of those aged over 60 years still have outstanding loans, averaging over 400,000 baht ($12,000), central bank data showed.

In all, around 30% of those with credit cards or personal loans in Thailand have a combined debt of 10 to 25 times their income, double that of international standards, according to the central bank.

Extravagant election promises made by political parties could worsen the situation, analysts said. Excluding overlapping policies, poll promises by nine major parties analysed in February could amount to 3.14 trillion baht ($92.52 billion), only slightly below the country's annual budget of 3.18 trillion baht, the Thailand Development Research Institute think-tank estimated.

Reuters