Thailand's economic outlook appears to be on the rise as the government intensifies its efforts to stimulate lending and reform financial regulations. On March 3, 2025, Deputy Prime Minister and Finance Minister Phichai Chuenwattana disclosed plans for discussions with the Thai Bankers' Association aimed at boosting the disbursement of new loans, particularly to small enterprises.
Currently, banks have exhibited caution, predominantly favoring larger corporations for lending opportunities. "Financial institutions have hesitated to issue loans, concentrating on big companies, leaving smaller entities struggling to secure credit," Phichai remarked. He added, "If small businesses encounter difficulties, this can eventually ripple back and impact the larger companies as well. Our goal is to inject capital back within the system, and providing loans is the best way to do this."
The government has also introduced subsidies, allowing commercial banks to reduce contributions to the Financial Institution Development Fund (FIDF) from 0.46% to 0.23%. This move indirectly promotes more funds available for lending within the banking industry.
Phichai pointed out the concerning trend of diminishing liquidity within the market. Annually, there is approximately 18 trillion baht outstanding as bank loans, and with net interest margin (NIM) sitting at around 3%, this means borrowers are paying nearly 500 billion baht just to cover interest expenses. This has translated to significant profits for banks, raising concerns about sustainability and accessibility. "The total profit for commercial banks has reached 200 billion baht, which seems excessive compared to Thailand’s current economic potential. I would like businesses to focus on sustainability instead of just maximizing profits," he asserted.
To alleviate these conditions, the government wants to initiate discussions with banks to address why loan issuance remains stagnant and how to rectify it. Among these measures includes the proposal for the Government Savings Bank, which is state-owned, to provide special loans of 10,000 to 20,000 baht per borrower to three hundred thousand accounts, targeting individuals engaged in trade who have never received loans before as part of the stimulus program.
Phichai also expressed the need to reconsider the restrictions imposed by LTV guidelines. While these regulations have been established to mitigate risks associated with rising bad debts, they may have the unintended effect of excluding borrowers who could repay loans. "It’s important to strike a balance where borrowers can access financing without heightening the risk of defaults," he stated. Therefore, he plans to engage the Bank of Thailand (BoT) to review these frameworks to facilitate this access.
Reflecting on the rising costs of living and the potential burdens loan repayments may impose, the government is also exploring various relief measures for borrowers, including the recently launched debt relief initiative dubbed “You Fight, We Help,” aimed at assisting those with debts of 5,000 baht or less. To date, assistance has been offered to over 100,000 accounts.
Regarding joint borrowing situations, where individuals may co-sign loans with others, Phichai proposed reviewing conditions to relieve some of the burdens on those co-borrowers automatically when the primary borrower is settled correctly. Currently, borrowers facing challenges are also being considered for additional temporary relief measures, pending discussions to formalize them.
Phichai also reminded stakeholders of the financial crisis termed the "Tom Yum Kung Crisis" when the government previously provided support during the collapse of the bubble economy, resulting in the establishment of the FIDF to this day. Many institutions still have not fully repaid their debts, but the government continues to be committed to facilitating the repayment process, easing pressures on borrowers and strategically introducing fresh capital back to the financial market.
The proposed measures signal the Thai government's proactive approach to addressing liquidity challenges and economic growth, which, if executed thoroughly, could significantly benefit small enterprises and drive long-term economic resilience.