The government's policy to ease access to mortgages for the poor and combating informal loans are factors liable for higher household debt, says Finance Minister Apisak Tantivorawong.
While admitting household debt is climbing, he said government policies to allow low-income folks to obtain mortgages and attempts to bring informal lenders into the formal lending system were contributors.
Although these policies may be deemed as creating systemic risks, these should be seen as "quality debts" aimed at helping low-income earners with the cost of living, said Mr Apisak.
State-owned banks have issued mortgages for low-income earners as property prices will become unaffordable for them over the next decade, and the government wants to provide housing to these people, he said.
"Any analysis of personal debt needs to be thorough, not just based on numbers," said Mr Apisak.
The National Economic and Social Development Council recently reported household debt in the third quarter of 2018 was equal to 12.56 trillion baht, an increase of 5.9% from the previous quarter, as consumers sped up their purchases of vehicles and especially houses ahead of new loan-to-value limits coming into force in April.
The ratio of household debt to GDP stood at 77.8% at the end of the third quarter of last year, according to Bank of Thailand data.
Bad debt still remains high and most people have not reduced their debt even as they approach retirement, said Bank of Thailand governor Veerathai Santiprabhob.
There should be a delineation between good-quality and bad-quality loans, said Mr Apisak.
Lending for basic necessities, such as housing, is a good quality loan, while obtaining loans to purchase mobile phones, motorcycles or conspicuous consumption are bad quality, he said.
Mortgages for low-income earners contribute to owning an asset, using income to repay the loan instead of leasing a property or condo unit, said Mr Apisak.
Refinancing informal loans to be in the formal lending system also contributed to the higher household debt ratio, but the move has improved the living standards and security of low-income earners, he said.
Improving people's quality of life through shouldering higher debt burdens is worthwhile as the country's non-performing loan (NPL) ratio is around 3-4% of total outstanding loans, said Mr Apisak.
NPLs will shrink as economic growth improves, he said.
Higher interest rates will affect debt repayment, especially for mortgages, with retail customers having to bear the brunt of higher interest rather than corporations because of lower financial liquidity, said Mr Apisak.
