Oil shock raises debt risks for households and SMEs

Thailand’s economic planning agency has warned that higher global oil prices could further weaken the ability of households and businesses to repay debt, adding pressure to an already fragile credit environment.

The National Economic and Social Development Council, or NESDC, said the sharp rise in oil prices following the conflict in the Middle East and the closure of the Strait of Hormuz had become a key risk for the Thai economy.

Brent crude climbed to US$144.42 per barrel on April 7, 2026, surpassing the previous peak recorded during the Russia-Ukraine crisis, according to the report.

Dubai crude is projected to average US$85-95 per barrel in 2026, with a midpoint of US$90, up from US$68.3 per barrel in 2025.

The increase reflects supply disruption from the Middle East, which accounts for about 20% of global crude supply. Dubai crude rose from an average of US$68.4 per barrel in February to US$129.3 in March and US$106.3 in April.

Under the base-case assumption, the NESDC expects the Middle East conflict to end in the first half of 2026 and shipping through the Strait of Hormuz to resume.

If that happens, global oil prices are expected to gradually ease in the second half of the year.

The NESDC said the recent oil price surge had affected the economy through higher living costs for households and rising operating costs for businesses.

It identified household and corporate debt repayment capacity as a key issue to monitor.

At the end of the first quarter of 2026, private-sector lending by deposit-taking financial institutions had returned to slight growth.

However, the NESDC said the credit situation remained vulnerable.

Business loan growth was still concentrated among large companies, while SME lending continued to contract and loan quality kept deteriorating.

The non-performing loan ratio for SMEs stood at 9.12% of total SME loans at the end of the fourth quarter of 2025, up from 8.51% in the same quarter a year earlier.

Stage 2 loans also rose to 15.82% from 14.78% over the same period.

Household loan quality has not deteriorated sharply, but the NESDC said household debt remained high.

This has led financial institutions to keep tightening lending conditions for households, becoming a major constraint on future consumption.

The agency warned that higher energy prices could further reduce repayment capacity among both households and businesses.

For households, higher transport costs and consumer goods prices would erode real income, leaving less money after essential expenses and weakening debt repayment capacity.

Low-income households and those with heavy instalment burdens are expected to feel the impact first, as their repayment ability is highly sensitive to changes in income.

Data from the National Credit Bureau showed that, in 2025, personal loan accounts with credit limits of no more than 50,000 baht saw a continued increase in 31- to 90-day delinquencies, classified as special mention loans.

The NESDC said borrowers in this group were already facing repayment difficulties and could come under further pressure from higher energy prices.

For businesses, the main risk comes from higher production costs, transport costs and prices of key inputs linked to energy, including plastic products, plastic packaging and fertiliser.

The most exposed sectors include transport, logistics, fisheries, aviation and public transport, as they carry high energy and transport costs.

Other vulnerable businesses include those relying heavily on energy or petrochemical-related inputs, such as plastics, plastic packaging, fertiliser, chemicals and construction materials.

Downstream businesses that use these products as key inputs are also at risk. These include restaurants, processed food producers, agriculture, retail, wholesale and packaging businesses.

The NESDC said businesses with limited liquidity, high debt burdens or already weakening loan quality would face greater risks if costs continue to rise.

SMEs are especially vulnerable because many have limited ability to pass higher costs on to customers.

National Credit Bureau data showed that since 2015, SMEs with borrowing limits of no more than 5 million baht had seen a steady deterioration in special mention loans and non-performing loans as a share of total loans.

The NESDC said this reflected existing weakness in cost pressure and liquidity, which could worsen further if energy, transport and input costs continue to rise.

The government has introduced measures to support those affected by the Middle East conflict following a Cabinet resolution on April 11, 2026.

These include a co-payment interest loan scheme to reduce production costs, the Government Savings Bank’s energy sustainability adjustment loan for the public, and the GSB soft loan scheme to revive Thai businesses, with revised criteria to cover more affected groups.

Other measures include the Government Housing Bank’s energy-saving housing loans, EXIM Bank’s EXIM Support Plus, the SME Development Bank’s SME Green Productivity loan, and relief measures for vulnerable groups and government contract partners.

The NESDC said relevant agencies should closely monitor how energy costs are passed through to prices of goods and services, as this could affect credit quality among households and businesses.

It also called for systematic and continuous assessment of relief measures to ensure they address problems effectively.