Thais face cash strain amid high debt, Bloomberg analyst warns

Thai households are facing mounting financial strain as elevated debt levels collide with rising living costs and external economic shocks, raising concerns over repayment capacity and the broader stability of the banking sector, according to Rena Kwok, senior credit analyst at Bloomberg Intelligence.

Speaking in an interview with The Nation Thailand, Kwok said Thailand’s economic recovery remains uneven, leaving households vulnerable to fresh inflationary pressures.

“Thailand’s economy is still relatively weak, while household debt remains high. As living costs rise and income recovery stays slow, these pressures are eroding borrowers’ ability to service their loans,” she said.

Thailand’s household debt-to-GDP ratio has climbed to 86.7%, according to the SCB Economic Intelligence Center.

These household pressures are now feeding into the banking sector. While major Thai banks reported combined profits of more than 50 billion baht in the first quarter, earnings declined year-on-year, reflecting growing headwinds from weakening borrower quality and rising costs.

Kwok warned that sustained high oil prices could further strain the system. If crude remains above US$100 per barrel, banks may need to raise credit costs by 20 to 30 basis points this year to account for heightened risks, directly impacting profitability.

Beyond direct energy costs, she emphasised the broader ripple effects of inflation, including rising input prices and softer consumer spending, which are expected to place additional stress on loan portfolios.

“These indirect shocks could more severely affect asset quality, particularly in energy-intensive and import-dependent sectors,” she said.

Despite these risks, Thailand’s banking system retains some resilience, supported by relatively strong provisioning buffers. However, Kwok cautioned that asset quality deterioration could extend into 2026 if external pressures persist.

The impact is unlikely to be uniform across lenders. Banks with more conservative loan structures and stronger buffers are better positioned to withstand prolonged uncertainty.

Bangkok Bank stands out for its corporate-heavy loan portfolio, which accounts for roughly 49% of total lending, alongside robust provisioning coverage. This provides a cushion against deteriorating asset quality, with its non-performing loan (NPL) ratio expected to stabilise at around 3%.

Similarly, Krung Thai Bank benefits from a strong sovereign-linked loan book and lower exposure to small and medium-sized enterprises (SMEs), which are typically more vulnerable during economic downturns. A significant portion of its retail lending is extended to government employees with stable incomes, helping to contain risk. Its credit costs are projected to remain manageable at around 2.9%.

In contrast, lenders such as Siam Commercial Bank and Kasikornbank may face higher credit costs due to greater exposure to more vulnerable borrower segments, including SMEs and unsecured retail loans.

Banks have already begun tightening lending standards, particularly for higher-risk segments, reflecting a more cautious approach to underwriting amid rising uncertainty. However, Kwok noted that financial institutions are still expected to play a supportive role in government efforts to assist vulnerable borrowers.

“Banks will remain cautious in their lending, but they will also continue to support targeted relief measures to help those most affected by economic pressures,” she said.

As external risks remain elevated and domestic recovery continues at a modest pace, the interplay between household debt, rising costs, and banking sector resilience will remain a key factor shaping Thailand’s economic outlook in the coming quarters.