Thailand is currently experiencing a steady increase in household debt, particularly in areas such as auto loans and debts from savings cooperatives, as reported by the secretary-general of the National Economic and Social Development Council. Household debt in Thailand rose by 3.6% in the first quarter of 2023, highlighting the need for close monitoring of auto loans and debt from savings cooperatives.
Non-performing loans (NPLs) have also increased in the country, reaching a rate of 2.68%. Of significant concern is the 30.3% surge in NPLs from auto loans, indicating a growing risk of bad debt.
Financial literacy and access to financial services for the Thai population have decreased compared to the levels seen in 2020. This underscores the importance of providing education on borrowing, finance, and debt management.
In the first quarter of 2023, household debt reached 15.9 trillion baht, marking a 3.6% increase from the previous quarter. This amount is equivalent to 90.6% of Thailand’s GDP. Real estate purchases and personal loans have been identified as the primary contributors to this surge in debt.
The rise in household debt, especially in auto loans and debts from savings cooperatives, is a cause for concern. The first quarter of 2023 saw a 3.6% increase in household debt, reaching a total of 15.9 trillion baht, which corresponds to 90.6% of the country’s GDP.
Furthermore, there has been a decline in financial literacy and access to financial services among the Thai population. Compared to 2020, individuals have become less knowledgeable about borrowing, finance, and debt management. This emphasizes the urgent need for educational initiatives to address these issues and ensure people can make informed financial decisions.
Despite these challenges, there have been positive developments in the employment sector. Non-agricultural industries, particularly the hospitality industry, have experienced growth, leading to increased job opportunities. However, the agricultural sector has faced challenges due to drought conditions, resulting in a contraction of employment within that sector. Nonetheless, the overall unemployment rate remains relatively low.
Thailand’s Rising Household Debt Compared to Other ASEAN Countries
Thailand is grappling with a serious issue of high household debt, which reached 90% of GDP in the fourth quarter of 2021, according to the Bank of Thailand. This is the highest level among ASEAN countries, followed by Malaysia with 87% of GDP. The COVID-19 pandemic has exacerbated the situation, as many households have lost income and turned to borrowing to cope with the economic downturn. However, household debt was already a structural problem in Thailand prior to the pandemic, increasing from 68% of GDP in 2012 to 79% in 2019.
Several factors have contributed to the rise in household debt in Thailand over the years:
- Low Wage Growth: Low wage growth relative to the export boom in the mid-2010s has forced many households to rely on consumer credit to maintain their living standards.
- Lax Financial Regulation: Insufficient regulation and oversight of the financial sector have enabled easy access to credit from non-bank sources, often charging high interest rates.
- High Cost of Living: The expensive cost of living, particularly for energy and housing, has strained household budgets, leading to increased borrowing.
The implications of high household debt are significant, including reduced household consumption and savings, potential instability in the financial sector due to non-performing loans, and negative impacts on overall economic growth.
To address this issue, Thailand should consider measures such as promoting wage growth, improving financial literacy and regulation, supporting debt restructuring, and reducing the cost of living. These steps can help lower household debt, enhance economic stability, and improve the well-being of its citizens. Diversifying the economy away from dependency on specific sectors is also crucial for long-term economic resilience.
