The latest report from the Bank of Thailand
revealed that Thailand’s 2Q20 household debt had risen following the disruption
of economic activities during the COVID-19 pandemic. The outstanding household
debt hit an 18-year high of 83.8% of the GDP, rising from 80.1% of the GDP
recorded during 1Q20. The trend of rising household debt reflects the different
circumstances of two groups of retail borrowers; some households with
purchasing power have incurred new debt, such as home loans, while others are
struggling with liquidity problems and need assistance from financial
institutions.
Regarding
the outlook of Thailand’s household debt in 2020, KResearch views that high
household debt remains one of the indicators of fragility in Thailand’s
economic structure. We expect that household debt will increase to a range of
88-90% of the GDP in 2020, because Thai economic performance may continue to contract
during 2H20. Meanwhile, retail loans, especially home
loans and car loans of those households with purchasing power and the ability
to repay debts, will continue to grow and may cause household debt to rise
continuously, albeit at a slower pace.
The deteriorating debt servicing ability of many
households, caused by unfavorable economic conditions, is an important issue
that warrants close monitoring. Although assistance measures for retail
borrowers including specific measures from each financial institution and
accelerating debt restructuring may help alleviate borrowers’ debt-related
burdens, the future income and employment of households are important factors
that will determine their credit quality, especially their debt servicing
ability.
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