Thailand’s Next Central Bank Governor: Candidates Tackle Household Debt Crisis

As Thailand grapples with a deepening household debt crisis and a sluggish economic recovery, the race for the next Governor of the Bank of Thailand (BOT) has reached its decisive stage. Two prominent candidates, Roong Poshyananda Mallikamas and Vitai Ratanakorn, have emerged as frontrunners, each presenting distinct visions to address the nation’s economic challenges. With household debt levels soaring and structural issues threatening long-term growth, their strategies could shape Thailand’s financial future for years to come.

The Final Contenders and Their Backgrounds

The selection committee has forwarded the names of Roong Poshyananda Mallikamas, the current BOT Deputy Governor for Financial Institution Stability, and Vitai Ratanakorn, Director of the Government Savings Bank (GSB), to Deputy Prime Minister and Finance Minister Pichai Chunhavajira for final consideration. Mallikamas brings extensive experience from her tenure at Krungthai Bank as Executive Vice President of Global Business and Strategy between 2017 and 2019, while Ratanakorn is recognized for transforming GSB into a social banking model with expansions into non-bank sectors. Their contrasting backgrounds reflect different approaches to tackling Thailand’s economic woes.

Household Debt: A Generational Burden

Household debt remains one of Thailand’s most pressing economic issues, with younger generations entering debt cycles earlier and retirees struggling to escape financial burdens. Mallikamas has highlighted the role of limited financial literacy and unexpected life events in perpetuating this crisis. She advocates for a comprehensive approach, addressing slow income growth and enforcing responsible lending practices among commercial banks.

One initiative Mallikamas champions is the “Khun Soo, Rao Chuai” (You Fight, We Help) scheme, designed to support borrowers committed to repaying their debts. In its first phase, the program reduced monthly repayments by 50% for the initial year, gradually increasing to 70%. However, she noted that the scheme’s success hinges on borrowers’ willingness to engage, stating, “The name says it all – you need to be willing to fight. It’s not designed for everyone.”

The second phase of the scheme aims to address shortcomings from the first, where over two-thirds of applicants were rejected due to strict eligibility criteria. Future adjustments will include borrowers with arrears of less than 30 days, aiming to broaden access. Yet, participation from commercial banks varies significantly by debt type. Mortgage debts with short delays have seen strong bank cooperation, while car loans with defaults exceeding six months have received minimal response, largely due to differing loan portfolios across institutions.

Mallikamas emphasized the BOT’s “best effort” approach in encouraging banks to enroll debtors, acknowledging the difficulty of setting uniform performance indicators given portfolio disparities. “As the regulator and promoter of this scheme, in collaboration with the Ministry of Finance and other agencies, we want to see commercial banks doing their utmost within the context of their loan portfolios,” she said.

Interest Rates: A Temporary Fix?

On the topic of monetary policy, Mallikamas offered a nuanced perspective on interest rate cuts as a tool to alleviate debt burdens. While acknowledging their immediate relief, she cautioned against over-reliance on such measures. “Cutting interest rates is like giving a blood transfusion—it helps, but it doesn’t make you stronger. What Thailand’s economy truly needs now are sustainable business models and a new investment cycle, which we haven’t had for decades” she explained.

Since late 2024, the BOT has implemented three policy rate cuts, but the transmission to the real economy has been slow. Mallikamas attributed this to Thailand’s already low interest rates, noting that monetary policy effectiveness diminishes near the lower bound—a phenomenon widely recognized in global economic circles. Additionally, banks’ caution due to credit risk concerns has further delayed the impact of these cuts, a challenge also evident during the post-Covid recovery period, though slightly less pronounced now.

To counter these limitations, the BOT has launched innovative programs like the Your Data project, a multi-sector initiative to create transparent financial profiles for borrowers. By allowing individuals to use their transaction histories as collateral, the project aims to boost banks’ confidence in extending credit. Additionally, a DIY debt resolution platform enables borrowers to assess their financial health and prioritize high-interest debts, facilitating negotiations with lenders through system-generated guidance letters.

A Call for Collaborative Independence

Vitai Ratanakorn, on the other hand, stressed the importance of the BOT maintaining independence but not isolation. He argued that while the central bank must preserve decision-making autonomy, it should also collaborate with fiscal authorities, the Board of Investment, the Ministry of Commerce, and the Stock Exchange of Thailand to address structural economic challenges that monetary policy alone cannot solve.

Reflecting on Thailand’s economic outlook, Ratanakorn pointed to early-year gains from robust exports and tourism between January and March. However, global uncertainties—such as potential US tariff policies and geopolitical conflicts—coupled with domestic political instability, pose significant risks for the latter half of the year. He warned that the current economic situation is more severe than the 1997 crisis, which mainly affected the wealthy and financial institutions. Today’s crisis affects the majority of the population.

Ratanakorn identified long-term structural issues, including declining export competitiveness, a vulnerable tourism sector, and entrenched household debt, as critical barriers to recovery. He called for new thinking, new approaches, and collaboration across all sectors to address these challenges effectively.

Practical Solutions to a Persistent Problem

Both candidates acknowledged the partial success of debt relief programs like the Debt Clinic and You Fight, We Help schemes, which have restructured debts for hundreds of thousands. However, many remain excluded, and Ratanakorn noted that for GSB borrowers, only 33% of combined state-owned and commercial portfolios have been covered, indicating significant gaps in coverage.

Ratanakorn proposed a multi-pronged strategy to tackle household debt. First, he emphasized economic growth as a natural debt reducer—if nominal GDP grows at 4% annually for several years, the debt-to-income ratio would decline. Second, lowering borrowing costs through sustained interest rate cuts could help borrowers repay principal amounts faster without increasing monthly burdens. Third, he suggested supplementary measures like transferring non-performing, unsecured debts to agencies for long-term restructuring at discounted rates of 3-7%.

He also advocated for expanding the Thai Credit Guarantee Corporation’s role to cover diverse loan types and introducing targeted low-interest loans for sectors like exporters and small-to-medium enterprises (SMEs) struggling against cheap foreign imports. While recognizing BOT concerns about excessive borrowing due to low rates, Ratanakorn argued that the benefits of reduced rates outweigh the risks, especially in a weak economic climate.

Monetary and Fiscal Alignment

A key point of Ratanakorn’s vision is the need for alignment between monetary and fiscal policies. He noted that fiscal measures deliver quicker, targeted results, while monetary adjustments like rate cuts take 6-12 months to impact the economy. He asserted that interest rate cuts, cash injections, or tax reductions alone won’t fix the problem and that there needs to be alignment between monetary policy, fiscal policy, and regulatory measures from other agencies—moving in the same direction and sustained over time.

Critiquing the pace of BOT rate cuts, Ratanakorn described them as slower than necessary, though recent reductions have eased some pressure. He stressed the importance of clear market communication to signal sustained rate cuts, alongside ensuring that lower policy rates translate into reduced lending rates—a process currently hindered by banks’ risk aversion in a fragile economy.

Looking Ahead: A Challenging Economic Landscape

Thailand’s economy faces a precarious outlook, with fears of a prolonged slowdown in 2025-2026. Inflation is projected to dip below the BOT’s 1% target range next year, creating a low inflation, low growth scenario. Traditional growth engines like tourism and exports may not suffice to drive recovery, as Ratanakorn observed: “Some sectors, like financial institutions, are doing very well. But many others, which form the majority, are not in good shape.”

As the selection process concludes, the choice between Mallikamas and Ratanakorn will signal the BOT’s direction—whether prioritizing regulatory innovation and targeted debt relief or broader structural reforms through cross-sector collaboration. With household debt and economic stagnation at the forefront, the incoming governor’s policies will be pivotal in determining whether Thailand can break free from its current financial quagmire and chart a path toward sustainable growth.