Thai Farmers Lose Pickup Trucks as Protests Raise Debt Risk

Koon Thaveepat is in danger of

losing his pickup truck and his livelihood. He’s behind on loan

payments as Thailand’s anti-government protests delay state

rice-purchase payments, threatening to plunge thousands of

farmers deeper into debt.

“I haven’t been paid for more than three months,” said

Koon, 62, who lives in Ubon Ratchathani province, about 600

kilometers (373 miles) northeast of Bangkok. “I have about

200,000 baht ($6,150) due from the government. A number of my

neighbors are also in the same situation. They are unable to pay

for fertilizers and rent planting and harvesting machines.”

Thailand, once the world’s biggest rice exporter, is short

of funds to pay 110 billion baht under Prime Minister Yingluck Shinawatra’s 2011 program to buy the crop at above-market rates.

The premier faces allegations that she was negligent in

overseeing the subsidy in a case that could lead to impeachment,

even as borrowings by farmers such as Koon increase the nation’s

household debt to gross domestic product ratio, the highest in
Southeast Asia after Malaysia.

“Delays in payments to rice farmers have significantly

worsened the household-debt situation,” said Voravan Tarapoom,

chief executive officer at BBL Asset Management Co. in Bangkok,

which oversees about $10 billion of assets. “While the amount

of money that the government owes to farmers is not that much,

it affects millions of low-income people who have to take on

more debt to meet even their daily expenses. This will further

worsen the already sluggish domestic consumption.”

Photographer: Dario Pignatelli/Bloomberg

Thailand, once the world’s biggest rice exporter, is short of funds to pay 110 billion… Read More

Thailand, once the world’s biggest rice exporter, is short of funds to pay 110 billion baht under Prime Minister Yingluck Shinawatra’s 2011 program to buy the crop at above-market rates. Close

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Photographer: Dario Pignatelli/Bloomberg

Thailand, once the world’s biggest rice exporter, is short of funds to pay 110 billion baht under Prime Minister Yingluck Shinawatra’s 2011 program to buy the crop at above-market rates.

Consumer Loans

The benchmark Stock Exchange of Thailand Index dropped 0.1

percent as of 3:58 p.m. local time. The baht fell 0.1 percent.

It has weakened the most after the Malaysian ringgit in the past

three months among 11 Asian currencies tracked by Bloomberg.

Household debt as a ratio of GDP rose to a record 80.1

percent in the third quarter in 2013, compared with 55.6 percent

in 2008, Bank of Thailand data showed. The delayed payments may

add to the debt risk, and the ratio will probably be higher in

the fourth quarter and early 2014 as growth in consumer loans

may be faster than the pace of economic expansion, BOT

spokeswoman Roong Mallikamas said this month.

Household debt climbed 8.7 percent in 2013 to 159,492 baht

per family, the National Economic and Social Development Board

said in a statement today. The data showed declining ability of

households to repay debt, it said.

Photographer: Dario Pignatelli/Bloomberg

A rice farmer takes a nap under a truck during a protest in Bang Pa-In, Ayutthaya… Read More

A rice farmer takes a nap under a truck during a protest in Bang Pa-In, Ayutthaya province, Thailand on Feb. 21, 2014. Close

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Photographer: Dario Pignatelli/Bloomberg

A rice farmer takes a nap under a truck during a protest in Bang Pa-In, Ayutthaya province, Thailand on Feb. 21, 2014.

The Thai economy grew at the slowest pace in almost two

years last quarter as political unrest hurt local demand and

tourism. Private consumption fell 4.5 percent in the fourth

quarter from a year earlier, a second straight decline.

Fastest Pace

While Thailand’s household debt-to-GDP ratio trails

Malaysia’s, it has risen at the fastest pace in Southeast Asia

in the six years since the global financial crisis, according to

Hak Bin Chua, a Singapore-based economist at Bank of America

Merrill Lynch. Malaysia has a ratio of 86 percent, Singapore’s

is 77 percent and Indonesia’s is 17 percent, he estimates.

“High household debt will likely weigh on consumer

spending and property demand over the next few years,” he said.

The SET Commerce Index, which includes consumer-related

stocks such as CP All Pcl, owner of Thailand’s 7-Eleven chain,

and consumer goods distributor Saha Pathanapibul Pcl, has fallen

3.4 percent this year compared with a 0.4 percent gain in the

SET Index.

Thailand’s central bank unexpectedly held its benchmark

rate last month, surprising economists who had predicted a cut.

Governor Prasarn Trairatvorakul said last week there is “some

policy space” to lower borrowing costs, and that political

factors have largely caused the recent slowdown.

Deadly Protests

Demonstrations against Yingluck that began Oct. 31 have

killed 19 people and injured more than 600, paralyzed parts of

the capital and disrupted a national election on Feb. 2. Two

people were killed in an explosion at a protest site in central

Bangkok yesterday, a day after a five-year-old girl died in a

blast at a demonstration site in eastern Trat province.

Fitch Ratings said this month prolonged confrontations

could impair economic performance and undermine the nation’s

credit strength. Moody’s Investors Service has warned the unrest

may hurt Thailand’s credit profile if it stretches beyond the

first half.

Household debt is a concern elsewhere in the region too,

with South Korean Finance Minister Hyun Oh Seok saying last week

the government plans extra measures to tackle record levels that

pose risks for the financial system and the economy.

Thailand’s household-debt risk is greater than its

neighbors, according to Gundy Cahyadi, a Singapore-based

economist at DBS Group Holdings Ltd.

‘Significant Slowdown’

“We need to remember that Thai household debt to GDP ratio

is comparable to economies like Malaysia or Singapore, both of

which have higher per capita GDP levels,” he said. The Thai

ratio may rise to about 82 percent this year, he said.

Still, Thai consumer-loan growth slowed to 12.9 percent at

end-2013 from 21.6 percent in 2012, according to BOT data.

Consumers have become more cautious and banks are tightening

their lending practices, the central bank said on Feb. 13.

“Since the middle of last year, we observed a significant

slowdown” in household debt, Prasarn said on Feb. 20. “In

fact, the growth rate of consumption credit has been cooling

down since the middle of last year, to our satisfaction.”

The Finance Ministry said last week it may sell bonds to

raise money to pay farmers after depositors opposed a proposal

by the government to borrow money from banks. Meanwhile, non-performing loans may rise, and with banks tightening lending,

farmers may turn to loan sharks, said Thanomsri Fongarunrung, an

economist at Phatra Securities Pcl in Bangkok.

For Thada Ampin, who traveled with other farmers on

tractors from central Uthai Thani province before abandoning a

planned protest last week in Bangkok, it may be the only option.

“We are suffering,” Thada said. “We have to borrow money

to pay for everything because the government failed to pay us.”

To contact the reporters on this story:

Suttinee Yuvejwattana in Bangkok at

suttinee1@bloomberg.net;

Anuchit Nguyen in Bangkok at

anguyen@bloomberg.net

To contact the editor responsible for this story:

Stephanie Phang at

sphang@bloomberg.net

Thai Farmers Lose Pickup Trucks as Protests Raise Debt Risk