Outstanding debt of Thai households grew 3.9 percent in 2021, which was on par with that reported for 2020. Due to the slow economic growth, the household debt to GDP ratio in 2021 surged to 90.1 percent, against the 89.7 percent recorded for 2020. The high household debt to GDP ratio is one of the country’s structural problems that has pressured overall household consumption and the economy.
As growth of economic activity has primarily been driven by soaring inflation rather than economic recovery, indebted Thai households are facing an immediate challenge in making ends meet and maintaining debt servicing ability. High household debts are prevalent in Thailand and elsewhere, but the severe impact of COVID-19 has caused financial positions of Thai households to weaken further as compared to other countries. Therefore, the solution to household debts, which represent one of the weaknesses in the Thai economic structure, will depend on the economic recovery - which must be consistent, though this may take a while - as household debts are linked with numerous economic and financial problems found with households and low-income earners, including their inability to earn adequate income to support their livelihood; they may be able avoid incurring new debts or repay existing debts if they have the ability to do so.
One of the Bank of Thailand’s policy directives for a new financial landscape that will play an important part in addressing household debts is the expansion of an activity-based supervision to cover more retail loan service providers for households. This is aimed at protecting low-income borrowers and maintaining stability at the macro level. At the same time, such loan service providers will be able to carry out their services with responsibility so as to ensure that their borrowers will have sufficient income to sustain their livelihood and not incur unnecessary debts such as refinancing existing loans. Meanwhile, changes seen in the household debt structure after 2016 show that credit card and personal loan debts increased from 6.0 percent in 2016, to 8.0 percent in 2021, which was in the opposite direction of loans for owning a business that gradually declined from 19.3 percent in 2016, to 18.1 percent in 2021, suggesting that a new criteria may be needed to ensure that households will not incur unnecessary debts while also gaining easier access to loans for business purposes.