Thai people are burdened with high household debt. For many of them, the burden starts early and can last a lifetime. Some young adults, in particular, have racked up massive credit card debt and do not have the ability to pay it off. The Thai workforce is also struggling with rising debt, with their debt levels this year the highest in the past 14 years. Worse still, many older adults are retiring buried in debt and carrying a great amount of it.

Thailand has among the highest household debt to gross domestic product (GDP) ratios in Asia, behind only South Korea and Hong Kong, according to a Bank for International Settlements ranking.

Levels of Thai household debt escalated between 2010 and 2020, with the household debt to GDP ratiojumping from 60% in 2010 to 90% in 2020, according to the Bank of Thailand (BoT).

In the first quarter of 2023, Thai household debt hit 16 trillion baht, accounting for 90.6% of the country’s GDP, compared to 86.9% in the fourth quarter of 2022. The surge was due to both increases in debt and a redefinition of national household debt by the Thai central bank to include student loans, agricultural cooperative loans, housing loans and microfinance offered by both existing banks and non-banks.

The nature of debt problems in Thailand is different from other countries, the BoT says. Nearly one–third of the total household debt in the country is made up of credit cards and personal loans which do not generate income while the majority of debt in other countries is derived from housing loans.

The central bank is stepping up efforts to resolve the household debt problem which has long been a concern for the country and grow the economy in a ‘sustainable’ way.

Ranadol Numnonda, deputy governor of the BoT’s Financial Institutions Stability, said the central bankhas worked hard with the financial institutions and lenders to set up measures to address the debt problems.

According to him, the measures cover plans to relieve the debt burden of borrowers with non-performing loans (NPLs), those with chronic debts,and borrowers with new debt.

He believes that lowering interest rates, a tool used tomanage debt, can help lessen the problems of borrowers with persistent debt.

Why are Thais falling into debt?

Thais have certain behaviors that lead them to sinkdeep in debt.

Some start borrowing money and growing debt early, while many spend more than they earn. Data from the central bank show that over 58% of Thai people aged 25-29 have debt problems, more than 25% of which are NPLs. Most of the debts they have are primarily attributed to credit cards, personal loans and car/motorcycle hire-purchase, which often lead to NPLs.

The high household debt appears to lead to more NPLs in the automotive sector, causing a rise in the confiscation of vehicles.

Weeks ago, Surapol Opasatien, chief executive of the National Credit Bureau, said in a Facebook post that about one million loan-default vehicles would be seized by lenders in the next four months from borrowers with non-performing auto car loans,mostly amongst Gen Y (27-42 years old) and Gen X (43- 58 years old).

According to the central bank, about 4.5 million or nearly half of 100 million NPL accounts have turned into NPLs during the Covid-19 pandemic due tolower income and job losses.

Almost 30% of the borrowers with credit card and personal loans said they have more than four accounts and a combined credit line 10 to 25 times their salary against an international standard of 5 to 12. They spend more than half of their monthly income on debt payments and many of them make a minimum payment. And that causes compound interest, making the balance larger, and lengthening the time they have to pay off the balance.  

In addition, Thais don’t have a financial safety net to deal with the unknown.

The data also show that over 62% of Thai households don’t have enough money saved to weather unexpected events, pushing them to seek either formal or informal loans when the need arises.

A survey by the central bank reveals that 42% of respondents admitted they have informal debt of about 54,300 baht on average per person. The study involved over 4,600 households from all regions ofthe country.  

Some Thai workers, meanwhile, are dealing with rising debt, the highest in the past 14 years.

A survey of Thailand’s household debt situation among the Thai workforce conducted by the University of the Thai Chamber of Commerce reveals that over 99% of respondents were in debt, mainly from daily living expenses as well as credit card, home and medical loans.

The survey was carried out on 1,300 respondents nationwide with a monthly salary of up to 15,000 baht.

The average debt per household stands at 272,528 baht in 2023, a rise of 25.04% over 2022. The figures illustrate the highest level in the 14 years the survey has been conducted.  

Thai seniors still have outstanding loans when they retire.  

The central bank data shows that over one-quarter of people aged over 60 are in debt, most of it from agricultural loans, credit cards and personal loans. They owe about 415,000 baht per person on average.

Building a strong financial foundation is key to sustainable solutions to household debt

Sommarat Chantarat, an economist from Puey Ungphakorn Institute for Economic Research, said the household debt problem in Thailand mainly stems from young adults who start borrowing and growing debt early, with most of the loans they take considered non-productive debt.

She was speaking recently at a seminar organised by the Thai Health Promotion Foundation.

This will affect their credit scores, making it difficult for them to get approval from lenders when they apply for a loan to start up their business in the future. This, in turn, would affect the country’s development, she added.

Sommarat noted that many Thai have fallen into debt as they have fluctuating incomes and liquidity problems. Some are duped into debt due to a lack of financial literacy. The surge in the Thai household debt is also attributed to government policies.

Sustainable solutions to household debt should start with building a strong financial foundation together,she said.

“It requires a collective effort from all parties. If people work together, I believe the country’s household debt problem could be resolved,” she added.

By Thai PBS World Feature Desk