The economic landscape of Thailand is currently facing considerable challenges, marked by a significant decline in the SET INDEX, which has fallen to approximately 1,159 points. This drop reflects an alarming loss of investor confidence since Prime Minister Phaethongthan Shinawatra assumed office in August last year when the index was at 1,303, signifying a decrease of 11% or about 49,500 million baht in market value. Amidst these worries, the ramifications of external economic powers, particularly the United States and China, loom large.
China remains focused on attaining an economic growth rate of around 5%, alongside keeping inflation below 2%. Officials are deploying measures such as issuing 4.4 trillion yuan in bonds to address local government debt and bolster infrastructure investments. In stark contrast, the U.S. is grappling with its own internal dynamics, as former President Donald Trump has resurfaced in the political arena, complicating matters with his controversial stances and policies that have left many American political figures puzzled.
Recent statements by Dr. Wichai Wittyakietloet, a noted economist from Thammasat University, have underlined the pressing need for reforms in Thailand's approach to household debt, which currently stands at a staggering 15.54 trillion baht, with 4% reflecting non-performing loans (NPLs). Dr. Wichai posits that a new initiative involving private entities purchasing debts from financial institutions could significantly alleviate this burden without drawing from state budgets.
"Buying debt from the secondary market can introduce significant funds into the system," he explained, suggesting that if implemented effectively, this policy could infuse between 1.6 to 3.2 trillion baht into Thailand's GDP, driving economic growth forward while also potentially decreasing NPLs by 50-100%.
This innovative approach, reminiscent of models successfully executed in countries like Iceland post-2008, is framed as a method to simultaneously stimulate the economy and tackle debt issues. However, success hinges on strict regulations governing the actions of asset management companies (AMCs) to ensure transparency and fairness for the debtors involved.
Moreover, the proposal suggests careful crafting of policies to ensure that not all citizens are treated equally; rather, targeted assistance for vulnerable populations could yield the most favorable outcomes. As Dr. Wichai noted, any attempt to tackle debt without addressing broader financial literacy and behaviors could lead to a proverbial cycle of debt, reminiscent of past hardships faced by countless households.
As these ideas coalesce within the Thai economic discourse, scrutiny from global trading partners persists. Thailand holds significant trading partnerships with countries within the European Union and the U.S., prompting experts to call for robust strategies that can withstand potential tariffs or tax implications announced by the U.S. market dynamics.
Sustaining economic resilience amid this complex backdrop requires crafting a pragmatic policy that maintains neutrality between China and the U.S., while nonetheless pushing for necessary economic adjustments within Thailand. Encouraging signs, such as the rebound in Singapore’s stock market, indicate that regional competitors are adapting more quickly to existing challenges, thus impacting investor sentiment in Thailand.
The proposed introduction of a 'bad bank' serves as a critical measure to address the pressing issue of NPLs within Thailand’s banking sector. Banking analysts posit that this could create new avenues for restructuring debts, alleviating the financial institutions under siege from rising NPLs while simultaneously allowing banks to achieve more manageable debt profiles. Under this idea, key figures also highlighted that KBANK has excelled in managing bad debts during 2023-2024, offloading 1.5 billion baht of NPLs, significantly assisting its overall financial health compared to SCB's 1 billion baht.
