Although Thailand’s
outstanding household debt fell in 1Q20 compared to the previous
quarter, the household debt level remains high (80.1% of GDP), as households
continue to take on large-sum debts, including loans for house purchases and
auto purchases, in line with operators’ marketing campaigns to maintain their market
shares, which is contrary to the signals of weakness in household purchasing
power and various sectors of the economy. At the same time, the rise in debt
for operations highlights the illiquidity that small entrepreneurs may have
begun to face since the economic slowdown in 1Q20, exacerbated by the impact of the ongoing COVID-19 pandemic.
The
impact of the COVID-19 pandemic has made household debt, which was already a
structural problem, more vulnerable. The burden of rising or persistently high
household debt is a problem not only for Thailand, but also for many other countries/regions
across Asia such as South Korea, New Zealand, Malaysia, Hong Kong, Japan and
China.
KResearch projects that Thailand’s household debt
to GDP ratio could climb by up to 88-90% by the end of
2020 due to the severe economic downturn. Meanwhile, the relief provided by financial
institution to small debtors to ease their financial burdens, including the
reduction of monthly installment amounts and the suspension of payments, will
result in the outstanding debt of households and retail customers not reducing
in line with economic trends, making it difficult to clearly assess data on
non-performing loans, which could reflect how commercial banks’ operation
performance will be affected in the coming quarters.
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