BOT likely to take steps to contain Thai household debt as total exceeds THB15.09 trillion

However, the debt-to-gross domestic product (GDP) ratio saw a marginal quarter-on-quarter decline from 87% to 86.9% in the fourth quarter of last year, according to Kanchana Chokpaisarnsilp, research executive at the Kasikorn Bank Research Center.

Overall household debt fell to a range of 85.5-85.8% in the first quarter of this year, which is the debt repayment period. Household debt level at above 80% is still considered high, Kanchana added.

In general, despite signs that the Thai economy is improving, people in the lower income groups with income uncertainties are still struggling with the current rising cost of living. Meanwhile, the existing debt burden has transformed into bad debt. The latest data shows an increase in household debt in the fourth quarter of 2022, even though the debt-to-GDP ratio decreased from 87.0% in the third quarter of last year. The outstanding household debt for the first quarter of this year is at 15.09 trillion baht, compared to 14.91 trillion baht in the previous quarter, according to Kanchana

Bank of Thailand (BOT) Governor Sethaput Suthiwartnarueput is concerned about the household debt level, which has been gradually increasing, as this could adversely affect Thailand’s economic recovery. Despite the decline in household debt level from 90% to 87%, the reduction rate is considered slow. The BOT would like to see the household debt level not exceed 80% of Thailand's GDP, Kanchana said.

Hence the BOT will implement additional measures, such as caution in lending, risk-based pricing (offering of varying interest rates and loan terms to different consumers based on their creditworthiness) and macro-prudential policies. The macro-prudential measure would involve having financial policies aimed at ensuring the stability of the financial system as a whole to prevent substantial disruptions in credit and other vital financial services necessary for stable economic growth. These measures will be further outlined and clarified by June by the BOT, Kanchana added.

According to Somprawin Manprasert, executive vice president and head of the Economic Intelligence Center at Siam Commercial Bank, household debt in Thailand remains an issue of concern, as the proportion of debt to GDP is higher than in many developed countries. Although the debt-to-GDP ratio decreased in the fourth quarter of last year, its monetary value expanded by 3.7%. Therefore, this matter is an ongoing concern with potential adverse impacts on the Thai economy, he said.

The solutions to tackle high household debt problems depend on two factors:

1. Cease accumulation of additional debt and reduce unnecessary borrowing, except for debt incurred for livelihood, or as business loans as it can create future income. Most of the current household debt is mainly for general consumption on items not considered basic necessities.

2. A state policy to help curb unstable income by creating job opportunities to ensure stable income and improve access to affordable loans.

Household debt in the first quarter of this year decreased to the range of 85.5-85.8% of GDP from 86.9% in the fourth quarter of last year due to debt repayment. However, as the Thai economy grows for the rest of this year, consumer loans could rise. Hence, the proportion of household debt will unlikely fall to 80% of GDP, which is the level the BOT sees as sustainable, Kanchana said.