Former premier Thaksin Shinawatra recently pitched a government-led household debt buyback programme as household debt tallied 89.6% of GDP as of the second quarter of 2024.
Under the initiative, the government would purchase individuals' debt from the banking system and allow them to repay it gradually.
Without requiring full repayment, the government will help individuals rebuild their lives by removing their names from the National Credit Bureau (NCB), freeing them from debt and giving them a fresh start. This initiative would not rely on government funds, as it could be financed through private investment, according to Thaksin.
In response to Thaksin's proposal, Finance Minister Pichai Chunhavajira said on Tuesday the ministry needs to review all the information and consider the opinions of various stakeholders.
During a joint meeting with the Thai Bankers' Association on Tuesday, he said there would likely be further discussions on this matter.
NO EASY TASK
Therdsak Thaveeteeratham, executive vice-president of Asia Plus Securities, said Thaksin's proposal to address household debt is a good idea, but "not easy to implement".
"The proposal to buy up outstanding household debt is promising, especially as high levels of household debt are a major issue for Thailand's economy. However, I don't think it can be easily executed," he said.
"We need to hear more about the source of funds for the government to purchase all the debt, which Thaksin has not disclosed. Without this information, it's difficult to assess whether the plan is feasible."
However, if the plan is successfully implemented, it could ease the deadlock in the banking system, while raising domestic consumption and the economy, said Mr Therdsak.
The property sector would also benefit, as banks are rejecting many new loan proposals, he said.
Suwat Wattanapornprom, head of the research division at Krungsri Securities (KSS), agreed more details are needed, especially regarding private sector involvement.
"The government still needs to clarify which types of debt will be covered by this plan. We don't believe it will address all household debt, which amounts to 90% of Thailand's nominal GDP. The government alone likely has an insufficient budget for such a large-scale initiative," he said.
"As Thaksin mentioned private sector involvement, the key issue is whether the private sector is willing to participate and who will manage the fund."
KSS believes the initial proposal had a positive psychological impact on banking and leasing stocks, driven by improved expectations for non-performing loans (NPLs) and better domestic stock market sentiment, said Mr Suwat.
BALANCE NEEDED
Yunyong Thaicharoen, chief economist of the SCB Economic Intelligence Center (SCB EIC), a research unit under Siam Commercial Bank, said the government should carefully balance the benefits and potential impacts of the household debt buyback initiative.
According to Mr Yunyong, a sustainable household debt resolution should primarily stem from economic growth, increased household income, and enhanced borrower access to credit and repayment capabilities. Therefore, a combination of short-term and long-term solutions is necessary.
"The debt buyback programme could provide relief to vulnerable borrowers trapped in a cycle of debt," he said.
"However, it should be a targeted measure rather than a broad-based initiative to prevent moral hazard."
The SCB EIC projects the Bank of Thailand will lower its policy rate two more times this year, by 25 basis points each time, to support economic recovery and ease financial burdens for businesses and households.
The centre anticipates rate cuts in June and later in the second half of the year, reducing the policy rate to 1.5% from 2% by year-end. The regulator already cut the rate by 25 basis points in February.
"Thailand's financial conditions can be adjusted to prepare for rising uncertainties. The economy is expected to face additional challenges, particularly from US protectionist policies, including tariff measures under the US President Donald Trump administration," said Mr Yunyong.
SCB EIC projects Thai economic growth of 2.4% this year, slightly less than the 2.5% posted in 2024. The economy returned to pre-pandemic growth levels by mid-2024, but still lagged behind regional peers, noted the think tank.
However, the pandemic left lasting scars on the Thai economy, with the Thai average annual growth rate the last four years 2.1% compared with 3% in the pre-pandemic period, according to SCB EIC.
"Given this sluggish growth, Thailand's GDP lost around 6 trillion baht over the past four years," he said.
In 2025, GDP growth is expected to peak at 3% year-on-year in the first quarter, driven by a low base effect, noted SCB EIB.
However, growth is projected to slow to 2.7% in the second quarter and moderate to 1.9% in both the third and fourth quarters.
Thailand's exports are expected to take a hit from Trump's tariff policies, with the think tank forecasting Thai shipment growth of only 1.6% in 2025, a sharp decline from an anticipated uptick of 5.8% in 2024.
Tourism and public investment should remain key drivers of economic growth, with foreign tourist arrivals expected to reach 38.2 million this year, up from 35.5 million the previous year, according to SCB EIB.
VARIOUS OPTIONS PROPOSED
Sorathep Rojpotjanaruch, head of the Restaurant Business Club, said assisting only NPL borrowers will not address the broader issue.
To improve access to financing, he recommended the government allocate funds to specialised financial institutions, enabling them to increase credit limits for existing borrowers.
Mr Sorathep also suggested authorities remove credit data for accounts classified under status code 21 with the NCB (debtors with overdue payments exceeding 90 days from the impact of Covid-19 or NPLs).
This change would allow operators to secure new loans, he said.
In addition, Mr Sorathep proposed the government establish a debt moratorium scheme, suspending debt repayments and waiving interest rate calculations for a specified period.
However, he said a debt restructuring initiative would only partially address the challenges faced by restaurant operators.
"The key challenge for the industry is high raw material costs and weakened consumer purchasing power," said Mr Sorathep.
He urged the government to introduce support measures for the restaurant sector that would provide significant benefits to the entire industry during this difficult time, such as a personal tax deduction for customers dining at eateries registered for value-added tax.
LONG-TERM IMPACT
Visit Limlurcha, vice-chairman of the Thai Chamber of Commerce, said household debt is a pressing concern that requires immediate action from the government.
He said any measures taken should adhere to sound principles and consider various alternatives.
"The government must ensure the measures do not create long-term issues," said Mr Visit.
He said small and medium-sized enterprises (SMEs) are struggling to progress because of high-interest debt while contending with fierce market competition, compounded by sluggish consumer purchasing power.
In addition, banks are not approving new SME loans for enterprises affected by household debt, said Mr Visit.
CLARITY REQUIRED
While the scheme to deal with chronic household debt is well-intentioned, more details are needed to know whether it will be an effective fix, said Kriengkrai Thiennukul, chairman of the Federation of Thai Industries.
"We prefer not to comment until the government gives clearer details of what it is planning to do," he said.
Mr Kriengkrai said the idea proposed by Thaksin sounds similar to state efforts to solve debt problems during the 1997 financial crisis.
He said the government's willingness to address the high level of household debt is positive, as the issue has plagued Thailand for a decade, affecting the nation's economy.
Kuakul Mornkum and Lamonphet Apisitniran