Domestic household debt rose 6.2 percent in 2Q15 to a total of THB10.71 trillion, according to the latest report by the Bank of Thailand (BOT)—a growth rate somewhat lower than the average record over the past several years, thanks to the economic slowdown and lenders' more stringent loan approval policies. Versus the GDP – using the newly adjusted calculation approach – household debt has reached 80.6 percent of GDP, rising minimally over the 79.9 percent and 79.6 percent at the end of 1Q15 and 2014 yearend, respectively.
KResearch forecasts that household debt during 3Q15 should continue to grow, albeit within limits. Home mortgages will likely maintain its crucial role to growth in household debt and aggregate loans in 2H15 after the robust growth experienced in 1H15. Being assured by the fact that loans are secured through use of collateral and most borrowers are prepared financially, commercial banks and specialized financial institutions remain top lenders in the household sector.
That said, growth in other retail loan products has slowed due to many factors, including financial institutions' stricter credit policies and decreased credit lines to high-risk customers. In addition, new household loan demand has been small as families become more frugal in their spending during hard economic times. As a result, mortgage credit expansion has been overshadowed by shrinkage in other retail loans.
All things considered, 3Q15 household debt may expand marginally. We evaluate that the ratio of household debt to GDP will reach 82.0-82.5 percent by the end of 2015. This forecast reflects slower growth in outstanding household debt, downward to 5.3-6.0 percent YoY, versus 6.6 percent YoY in 2014. This deceleration is taken as a positive sign that may help lessen uneasiness over economic stability in the long run.
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