Thailand faces looming household debt crisis, set to cross 91% of GDP by year end, says bank

Thailand’s household debt is expected to reach a staggering 91.4% of the GDP, soaring to 16.9 trillion baht by the close of 2024, according to a report from TMBThanachart Bank.

Thailand is revitalizing itself for an economic challenge as household debt is expected to reach a staggering 91.4% of the GDP, soaring to 16.9 trillion baht by the close of 2024, according to a report from TMBThanachart Bank. The alarming prediction has ignited concerns over the economic health of Thailand, with TTB Analytics, an economic analysis centre affiliated with TMBThanachart Bank, attributing the surge to a sluggish economic recovery and stagnant income growth for individuals.

The economic analysis centre highlighted the impact of a slow economic rebound, which has failed to keep pace with the soaring cost of living. Individuals are experiencing limited income growth, leading to a situation where household debt is increasingly becoming a burden. The increase in finance costs has further compounded the issue, making it difficult for borrowers to meet their debt obligations. Many are resorting to alternative sources, including informal lenders and loan sharks, to cope with the financial strain.

Bank of Thailand (BOT) data for the third quarter of 2023 emphasizes the gravity of the situation, revealing that the total outstanding balance of household debts reached almost 16.2 trillion baht. This marked a 3.4% year-on-year rise, accounting for a substantial 90.9% of Thailand’s GDP (Gross Domestic Product). The data also suggests an ongoing trend of accelerating debt levels, posing a significant threat to the economic stability of Thailand.

It was also reported by the central bank that non-performing loans in banks came in at around 152 billion baht at the same period. It reflected an increase of 3.6 per cent from the earlier quarter. The Bank of Thailand also added that the outstanding debt portion falling within the 1 to 3 months amounted to around 362 billion baht.

The benefits are concerted in larger companies when the economy of Thailand exhibits signs of recovery, especially in the export sector. The centre also noted that the tourism industry is experiencing slow growth, primarily pushed forward by small businesses. The condition of these businesses remains ‘fragile’ financially. Noting the undisciplined spending of the consumers of Thailand, the centre raised concerns regarding the same.

The Bank of Thailand is likely to play a pivotal role in formulating and executing policies that mitigate the risks associated with burgeoning household debt. The government, financial institutions, and regulatory bodies should collaborate to devise a comprehensive strategy that addresses the root causes of the rising household debt crisis, ensuring a sustainable and resilient economic future for the nation.