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Thai Household Debt Record Thai Household Debt Crimps Rate-Cut Room: Southeast Asia

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Din Ruenmeesang spends about half his monthly income making minimum payments on his seven credit cards and multiple bank loans. That isn’t stopping the 33-year-old from borrowing again to buy a new car next year.

Spenders like Din are making it hard for Thailand’s central bank to cut interest rates even as Southeast Asia’s second-largest economy struggles with weakening growth. Thai household debt has more than tripled in a decade to a record high 83.5 percent of gross domestic product, and lower borrowing costs may exacerbate that.

“Life is short, and I want to enjoy it,” said Din, who works in the finance department of Bumrungrad International Hospital in Bangkok, and has racked up more than 200,000 baht ($6,100) in debt from buying clothes, shoes and decorating his apartment. “When I am short of money, I use personal loans. Interest rates aren’t bad. I still have room to borrow more.”

Central bank monetary policy undermined by consumer debt???

Is this a common trait in South East Asia?

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Fastest Increase

In Southeast Asia, Thailand and Malaysia have experienced the fastest increase in household indebtedness in the past five years, and the level is elevated relative to income levels, Rahul Ghosh, a senior research analyst at Moody’s Investors Service in Singapore, said in an October report. It poses a risk to private consumption growth and banks’ asset quality as the global credit cycle gradually tightens, he said.

Thai household debt was 10.03 trillion baht as of the end of June compared with 2.85 trillion baht in the same period in 2004, data show. Malaysia’s household debt was 86.8 percent of GDP as of end-2013, according to central bank data.

The Thai central bank has said the level of household debt is “alarming,” and asked the military-run government not to introduce policies that stimulate unnecessary borrowing. Prime Minister Prayuth Chan-Ocha, who seized power in a military coup in May, has unveiled a stimulus package of about $11 billion and pledged to quicken budget spending to boost consumption.

“We want the economy to grow and people to spend money, but we also want those who have lots of debt to be careful,” Governor Prasarn Trairatvorakul told reporters yesterday. “When we have lots of debt, it may be a constraint to growth.”

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