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4 Jul 2023

Thai Economy

Household debt, 1Q23: Declining to 90.6% of GDP, but Thailand must accelerate the implementation of sustainable measures to reduce household debt (Current Issue No.3419 Full Ed.)


        The Bank of Thailand (BOT) has improved the coverage of its data on household borrowings or household debt by including new data from: 1) the Student Loan Fund; 2) National Housing Authority; 3) Pico Finance; and, 4) non-savings cooperatives, in order to get a clearer picture of household debt, particularly on borrowings for educational and occupational purposes. Those borrowing for occupational purposes tend to have low and/or irregular income, and their lenders are largely cooperatives. As of 1Q23, household debt outstanding, based on the new dataset, grew roughly by THB766 billion from the THB15.19 trillion that was based on the previous dataset, to THB15.96 trillion, which amounted to 90.6 percent of GDP, down from the 91.4 percent of GDP reported in 4Q22. It is expected that household debt outstanding will continue to decline after peaking at 95.5 percent of GDP in 1Q21.  
        A new wave of household debt has shown signs of slowing down, particularly debt with relatively high credit limits, due probably to the increased financial vulnerability of households, rising lending rates, and specific factors related to home loans after the relaxation of the loan-to-value (LTV) ratio limit was lifted in late 2022.
        In 2023, we at KResearch expect that the household debt to GDP ratio will decline to a range of 88.5-91.0 percent, which remains unsustainable and requires monitoring. However, the progress and clearer direction of the BOT in addressing household debt issues is considered a positive starting point, and may help gradually ease pressure on household debt in Thailand. However, it must be noted that addressing household debt will continue to be challenging ahead due to the complexity of issues that are related to household income and behavior, plus Thailand’s demographic structure, which shows that the country is already an aged society, meaning that households may face greater limitations in paying off their debt. 

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Thai Economy