11 July 2024

Thailand’s household debt is expected to soar to 16.9 trillion baht, or 91.4% of GDP, by the end of this year, with the value of non-performing loans (NPLs) in the banking system estimated at about 152 billion baht, according to TMB Thanachart Analytics.

Household debt, by the end of the third quarter last year, stood at 16.2 trillion baht, up 3.4% on the same period a year before, and the debt accounted for 90.9% of GDP.

The 3.4% increase was less than the same period in 2022 because commercial banks had tightened lending practices, which was contradictory to credit card loans, leasing and personal loans, which increased at a higher rate within a decade, said TMB Thanachart Analytics.

NPLs in the banking system increased by 2.79%, to about 152 billion baht, while outstanding car lease repayments, overdue by 1-3 months, amounted to about 170 billion baht, excluding lending by non-bank institutions and special financial institutions (SFIs).

The bank said that the anticipated slow growth of household debt this year is in line with the gradual economic recovery.

Thailand’s household debt level in the future remains fragile due to the slow pace of economic recovery, even though the economic outlook this year is better than last, higher financial costs, which may affect debtors’ ability to repay, and a lack of financial discipline among the Thai people.

Household debt higher than 80% of GDP will affect consumption and economic growth in the long run. TMB noted that a third of the household debt is for consumption, such as credit card borrowing and personal loans, which are considered as non-productive loans.

As long as the grass root economy remains weak, the debt servicing ability of borrowers will not improve, said the bank, as it recommends responsible lending practices in parallel with the introduction of risk-based pricing, to improve the financial discipline of household debtors.