Based on the latest data released by the Bank of Thailand, Thai household debt is continuing to demonstrate a decelerating trend for the sixth consecutive quarter in 2Q17, falling to 78.4 percent of GDP, from 78.7 percent in 1Q17. Although household debt has surged to THB11.603 trillion in 2Q17, rising 3.1 percent YoY, the rate of increase has decelerated versus the 3.2 percent YoY seen in 1Q17.
KResearch views that this trend of decelerating expansion in household debt reflects the wariness of both creditors and borrowers. Financial institutions – including commercial banks and non-banks – are now quite cautious toward retail loan approvals – e.g., housing loans, credit card loans and personal loans, now focusing more on loan quality. At the same time, the general public has become apprehensive toward increasing household debt because they are already burdened with high debt levels.
As for the outlook over the rest of 2017, household debt growth has decelerated relative to GDP expansion, so KResearch views that the ratio of household debt to GDP may slip to the lower end of our forecast range of 78.0-79.0 percent of GDP overall for the entirety of 2017. Nonetheless, it is noteworthy that although the ratio of household debt to GDP in 2017 will likely be lower than in 2016, the ratio of debt service to income is still persistently high. This implies that private sector purchasing power and spending sentiment may only recover slightly this year. So, better financial discipline is still the most important element toward reducing household sector's financial fragility, as well as that of the entire Thai economy.