By Kitiphong Thaichareon and Orathai Sriring
BANGKOK (Reuters) - Thailand's cabinet on Wednesday approved debt support measures, including interest suspensions and reduced principal payments, to help tackle household debt, Prime Minister Paetongtarn Shinawatra said.
The measures will support retail borrowers and smaller businesses and solve debt problems in a more tangible and sustainable way, she told a press conference.
The government has been trying to ease Thailand's household debt burden, which it sees as a constraint on consumption and economic growth.
Thailand had an 89.6% household debt-to-GDP ratio at the end of June, amounting to 16.3 trillion baht ($482 billion), among the highest levels in Asia.
Finance Minister Pichai Chunhavajira told reporters that cabinet also agreed to let banks pay a reduced annual contribution of 0.23% of their deposits to the Financial Institutions Development Fund (FIDF) for three years.
The reduced FIDF contributions would help banks support debtors, officials have said.
Banks currently must pay an annual regular contribution rate of 0.46% of their deposits to the FIDF, the central bank's rescue arm that provides financial assistance to troubled institutions.
The measures will help borrowers with debts that are up to a year overdue, covering housing loans of up to 5 million baht ($148,060), car loans not over 800,000 baht and smaller firms' loans of up to 5 million baht, the government said.
About 1.9 million borrowers with debts of 890 billion baht ($26.3 billion) would benefit from reduced instalments and interest suspensions for three years, the central bank said.
Pichai said the debt measures would help reduce non-performing loans as the government tries to boost the economy.
Southeast Asia's second-largest economy is expected to grow 4% annually in the final quarter of 2024 and 2.8% for the whole year, Pichai told a separate press conference. Last year's growth was 1.9%.
" Next (LON: NXT ) year it will increase further... I dream of as much as 3.5%," he said, adding growth would be supported by government stimulus measures.
Central bank Governor Sethaput Suthiwartnarueput said household debt was a long-standing structural problem.
"The overall economy is likely to expand and income tends to return gradually, but some debtors are still facing problems and need help to move on," he said.
Pichai also said he would seek ways to provide credit of another 1 trillion baht for the economy via state-owned banks as liquidity was high.
($1 = 33.82 baht)