Thai household debt hits record high
Driven by government incentives for consumer credit and home loans, 85 per cent of Thai households now find themselves with debts equivalent to 30 per cent of their income without adequate risk assessment. The Central Bank has set the household debt ratio at 80 per cent of GDP to avoid risks to the country’s overall financial stability.
Bangkok (AsiaNews) – Household debt has become a drag on Thailand’s economy as it tries to pull itself out of its current crisis. Easy access to credit and loans and the increasingly popularity of credit cards have favoured online shopping and mortgages, making matters worse.
Many Thai households have been spending at levels previously considered unattainable, to buy a home or car, without proper risk assessment.
Today, 85 per cent of Thai households have debts equivalent to 30 per cent of their income from work or savings, with a high chance of default.
Bad policies and poor management pursued by successive Thai governments, including the military junta that came to power in 2014, have made household debt worse.
The latter has increased considerably, from 59.3 per cent of GDP in 2010 to 86.9 per cent in the last quarter of 2022, where it has remained in the first quarter of this year.
For the National Economic and Social Development Council, the debt in 2022 reached almost US$ 435 billion in the fourth quarter, up by 3.5 per cent on 2021, but proportionately lower than the previous. Debt grew on average by 6.0 per cent over the past five years.
Analysts expect a slight decline by 2027, but still above the 80 per cent target indicated by the Bank of Thailand to avoid long-term negative consequences for the country and its overall financial stability.
As a result of the ongoing crisis, made worse by the pandemic, higher interest rates and an already large debt burden will weigh on low income Thais’ capacity to get short-term credit.
But getting borrowers to slow down will still have serious consequences for many of them.