Average household debt in Thailand has reached a record high, driven by slow economic growth, reduced incomes, and rising living costs, resulting in difficulties for people in servicing their loans, according to a survey released on Tuesday.
The average debt per household now stands at 606,378 baht, reflecting an 8.4% increase from the previous year, as reported by the University of the Thai Chamber of Commerce in a survey conducted in early September. This marks the highest level recorded since the survey began in 2009.
The survey revealed that 69.9% of the debt comes from formal lending, a decrease from 80.2% last year, while 30% stems from informal lending. The rise in informal lending is attributed to many individuals reaching their credit limits with formal institutions, leading them to seek loans from loan sharks.
Many consumers face inadequate income to meet expenses, unexpected financial emergencies, and high living costs, according to the university’s findings.
The average monthly debt payment has increased to 18,787 baht, up from 16,742 baht last year, with a delinquency rate of 71.6%.
This debt burden has negatively impacted Southeast Asia’s second-largest economy, which has been lagging behind regional peers due to high borrowing costs and weak exports amid a slow recovery in its primary trading partner, China.
Concerns have been raised by both the government and the Bank of Thailand regarding the nation’s household debt, amounting to 16.4 trillion baht, or 90.8% of gross domestic product (GDP) as of the end of March 2024, making it one of the highest debt levels in Asia.
The central bank has proposed several measures aimed at reducing the household debt ratio to 89% of GDP by next year.
For context, International Monetary Fund data shows Malaysia’s household debt at 67% of GDP and Singapore’s at 48.6% for 2022.
The survey, which included 1,300 participants from September 1-7, found that a majority had faced difficulties in servicing their debt over the past year and anticipated similar challenges in the coming year.
“We’ve been dealing with debt issues for a long time, and we haven’t been able to resolve them,” said Thanavath Phonvichai, president of the university, during a briefing.
Despite the increasing debt levels, he noted that most household debts are related to daily expenses, the purchase of durable goods such as homes and vehicles, and business activities, suggesting that they are not detrimental to the overall economy. He stated, “Household debt will improve once the domestic economy recovers and experiences strong growth.”
The Federation of Thai Industries has revised its domestic vehicle sales target downward by 200,000 units to 550,000, indicating that high household debt and stricter lending regulations are affecting demand.
Finance Minister Pichai Chunhavajira emphasized the urgent need to address debt issues and suggested that the Bank of Thailand should support retail borrowers. He also mentioned plans to engage with banks to provide more assistance to those in debt.
New Prime Minister Paetongtarn Shinawatra, who took office last month, has committed to immediately stimulating the economy.
On Monday, the government announced a distribution of 145 billion baht to state welfare cardholders, set to begin next week. This initiative is part of a flagship “digital wallet” program, which could ultimately benefit 50 million people, although it currently appears that most of the funds will be distributed in cash.
