Former central bank governor warns of possible economic bubble if massive debts are not controlled

A former central governor has warned the country of massive debt incurred by credit unions and government financial institutions that are still predominant and could cause economic crisis similar to what it happened two decades ago.

Warning by former governor of the Bank of Thailand Dr Prasarn Triratvorakul was made as he addressed at the 20th Anniversary of the Tom Yum Gung Crisis Conference yesterday.

At present Thailand’s national economy is better balanced and more stable than it has ever been, he said but cautioned that this does not mean that Thais can be complacent.

Instead, solutions must be quickly found to solve critical problems as soon as they are detected.

He placed particular emphasis on the stability of local credit unions which at present are subsidizing loans at an alarmingly carefree manner.

He stated further that the same also applies to government backed financial institutions which are granting loans without serious regard for good governance or accountability.

Another important concern is the extraordinary investments being made in the real estate sector which threatens to overbalance the economic equilibrium.

In the address, he said, many new financial institutions are cropping up in the country but the checks and control mechanisms have not kept up with this development. This directly applies to credit unions and government backed financial institutions. We must not be complacent as these institutions grow very quickly but at the same time are afflicted with a lot of problems. What is rather sad and strange is the lack of initiative by the current, as well as past governing bodies to take this opportunity to regulate and install safeguards to circumvent a future crisis that will be a repeat of what happened in the past. Although it can be argued that thus far, no problems have surfaced, isn’t it better to circumvent the problem beforehand instead of reacting to it later.

Source: Thai Public Broadcasting Service (Thai PBS)

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