The Bank of Thailand foresees a continued improvement in the reduction of Thailand’s household debt relative to GDP, as the nation’s economic recovery progresses and loan growth moderates.
Thailand’s household debt-to-GDP ratio for the first quarter of this year stood at 90.9%, a slight decrease from the previous quarter, as stated by central bank governor Sethaput Suthiwartnarueput. This reduction was primarily driven by the ongoing economic revival, he noted.
Official data from the central bank reveals that total household debt, adjusted for seasonal variations, was recorded at 16.4 trillion baht, equating to 90.9% of GDP in the first quarter of 2024. This figure was lower than the 91.0% recorded in the previous quarter and 90.8% in the same period of 2023.
Anticipating a progressive uptrend in the Thai economy, the central bank projects year-on-year growth of 2%, 3%, and 4% for the second, third, and fourth quarters of this year, respectively, following a 1.5% expansion in the initial quarter.
Sethaput highlighted that the banking sector is experiencing a deceleration in loan growth, aligning with a trend of debt reduction post-pandemic, coupled with heightened credit risks in specific borrower categories. Notably, auto loans in the household sector have declined, partly due to challenges in the automotive industry.
During the first quarter of this year, loans for cars and motorcycles amounted to 1.76 trillion baht, down from 1.80 trillion on a year-on-year basis, based on the household debt data provided by the regulator.
The automotive domain in the country faces a mix of structural and cyclical hurdles across different vehicle sectors. The central bank noted a 40% drop in used car prices year-to-date and intense pricing competition in the electric vehicle market, causing delays in consumer buying decisions and impacting auto loan growth.
Sethaput expressed optimism that with an advancing economic recovery and restrained loan growth, the household debt-to-GDP ratio will continue its downward trajectory.
Nevertheless, the central bank remains vigilant about the concerns surrounding small and medium-sized enterprises (SMEs) amid the subdued loan growth trend. Heightened credit risks for SMEs, particularly smaller entities, have raised obstacles in their loan accessibility.
The return on small SME loans for banks stands at 8-10%, whereas the total cost ranges from 11-13%, primarily attributed to credit expenses at 8-10%, while funding and operational costs each average around 2-3%, as per the central bank’s analysis.
To enhance loan access for small SMEs, loan guarantee frameworks and open data systems are deemed instrumental tools, with ongoing efforts by the central bank towards this objective.
Furthermore, the central bank underscored the growing competition from Chinese products, impacting the competitiveness of local SMEs and presenting a challenge shared by various countries.
