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1 Oct 2019

Thai Economy

2Q19 Household Debt to GDP Remained Static at 78.7% with Debt Growing Faster than the Economy (Business Brief No.3823)

  • Outstanding household debt grew at a slower pace of 5.8 percent YoY in 2Q19 after hitting a four- year high of 6.3 percent YoY reported for 1Q19 due partly to the slowdown in home loans following the enforcement of LTV measure in April 2019. Personal home loans (extended by commercial banks, specialized financial institutions and other financial institutions) recorded a slower growth at 6.8 percent YoY in 2Q19 after accelerating to 8.0 percent YoY prior to the implementation of LTV measure during 1Q19.
  • However, Thailand's household debt is still a major cause for concern and requires a solution from many parties. The household debt to GDP ratio in 2Q19 was on a par with that reported for 1Q19 at 78.7 percent, representing the highest level in two years and a half.  
                   Noticeably, household debt in Thailand has grown faster than the nominal GDP growth throughout the past one year (3Q18 to 2Q19), i.e., household debt increased approximately 6.0 percent on average per quarter while the Thai nominal GDP grew about 4.5 percent on average per quarter.  
                   This suggests that debt servicing ability is an important issue concerning household debt amid sluggish growth seen in household income and the Thai economic performance overall although interest payments for some loans have declined in line with retail loan interest rates.  
  • Regarding the household debt outlook for 2019, KResearch has revised downward our 2019 household debt to GDP ratio to 78.5-79.5 percent (from the prior estimate of 77.5-79.5 percent) due to the slower recovery foreseen in the Thai economy during the remainder of 2019.  
            However, we hav​e assessed that new measures to be introduced by the Bank of Thailand (BOT) to supervise financial institutions and financial system stability may help prevent systematic risk within the Thai financial system. Meanwhile, the BOT's requirement for financial institutions to consider the debt servicing ability of borrowers and their financial status after making loan installment payments when extending retail loans may be one of the ways that will help households reduce excessive debt.