Thai household debt hits 86.7% of GDP as borrowing shifts to daily spending

Thailand’s household debt has climbed to 86.7% of GDP, with fresh data pointing to a growing reliance on borrowing for day-to-day expenses as households struggle to cope with a fragile economic recovery.

According to the SCB Economic Intelligence Center (SCB EIC), total household debt rose in the fourth quarter of 2025, driven primarily by an increase in personal consumption loans. Outstanding debt reached 12.72 trillion baht, up around 119 billion baht from the previous quarter.

The trend suggests that many households continue to rely on credit to support daily spending, as income recovery remains uneven and insufficient.

By contrast, housing loans saw only a slight increase and remained at relatively low levels, while several types of credit continued to contract. These included hire-purchase loans for cars and motorcycles, education loans and business loans, all of which declined further from the previous quarter.

A breakdown by lender shows that lending from private financial institutions has continued to shrink, reflecting cautious credit conditions. Commercial banks, credit card companies, leasing firms and personal loan providers, which together account for around half of total household lending, have tightened their lending practices.

Outstanding household loans from commercial banks fell by about 2% year on year, marking a seventh consecutive quarter of contraction. Lending by credit card, leasing and personal loan providers also declined by 0.6% year on year, extending a five-quarter downward trend.

Despite this, overall household debt has continued to grow, supported by lending from state-owned financial institutions and specialised financial institutions, which have expanded in line with government support measures aimed at sustaining the economy.

At the same time, borrowing through savings cooperatives and pawnshops has accelerated significantly, reflecting a shift towards more accessible and flexible sources of credit as mainstream financial institutions remain more restrictive.

The data points to a growing number of households facing income shortfalls and turning to short-term borrowing to maintain liquidity. This trend raises concerns about the accumulation of debt burdens and increasing risks to repayment capacity in the period ahead.

SCB EIC warned that Thailand’s household debt situation is likely to face rising risks, driven by a still-fragile labour market and a rapid increase in the cost of living.

Debt-servicing capacity is expected to deteriorate further due to two key factors.

First, labour market fragility is becoming more evident. Thailand’s unemployment rate rose to 0.9% in the first two months of 2026, partly due to difficulties faced by new graduates entering the job market. The unemployment rate among first-time job seekers has increased, reflecting weaker demand for new entrants.

In 2025, employment among those aged 15 to 24 declined for a second consecutive year, suggesting fewer opportunities for young workers. Some have been pushed into informal employment, where income stability is typically lower than in formal jobs.

Overall employment has also continued to decline, particularly in the industrial sector, which contracted in 2025 for the first time in four years since the Covid-19 period.

This aligns with a slow economic expansion and continued weakness in manufacturing. Meanwhile, a shift of workers from agriculture to higher-income sectors such as services has been observed. However, the service sector has limited capacity to absorb labour, and many jobs offer relatively low wages, contributing to a decline in average income.

These factors are expected to weigh further on household income prospects, reinforcing broader economic risks. Data from the Department of Business Development also shows that new business registrations have continued to decline, reflecting weaker private investment and fewer job creation opportunities.

Second, rising geopolitical tensions in the Middle East are pushing up living costs and putting additional pressure on real incomes.

Higher energy prices have had a broad impact on the cost of goods and services. SCB EIC forecasts inflation in 2026 to accelerate to 3.2%, which would erode real wages that have only recently recovered to near pre-Covid levels.

At the same time, rising energy costs are increasing business expenses, affecting profitability and potentially limiting hiring or wage increases in the near term.

Several sectors are considered particularly vulnerable, including rice cultivation, wood processing for construction, and industries related to chemicals, plastics and synthetic rubber, where higher input and transport costs are significant.

Exports to the Middle East have also been affected, while around 2.6 million workers or 6.5% of the total workforce are employed in sectors at risk from these disruptions.

If businesses are forced to control costs amid ongoing uncertainty, workers in these sectors may face reduced working hours, lower overtime income or slower hiring, further weakening the labour market.

SCB EIC said government measures should focus on easing cost-of-living pressures in the short term while addressing structural issues over the longer term.

In the near term, targeted support particularly for energy costs should be prioritised to help vulnerable households and low-income groups, which tend to spend a higher share of income on food and energy. Measures should be temporary and well-targeted to support purchasing power and reduce the need for additional borrowing for basic living expenses.

At the same time, efforts to restructure debt and ease the burden on vulnerable borrowers should continue, helping to improve liquidity while income recovery remains incomplete.

Over the longer term, addressing household debt sustainably will require tackling its root causes, particularly by raising income levels and improving earning capacity. This includes developing workforce skills in line with market demand, creating higher-productivity jobs and expanding access to new income opportunities.

Improving welfare systems to better support an ageing society and strengthening financial discipline and resilience among households will also be key to reducing reliance on consumption-driven borrowing and ensuring more sustainable debt management in the future.