10-9-2024 (BANGKOK) Thailand’s households are grappling with unprecedented levels of debt, according to a recent survey conducted by the University of the Thai Chamber of Commerce. The findings, released on Tuesday, paint a grim picture of the financial health of Thai families, with average household debt reaching a staggering 606,378 baht (US$17,908) – an 8.4% increase from the previous year and the highest level recorded since the survey’s inception in 2009.
The alarming rise in household debt is attributed to a perfect storm of economic challenges facing the Southeast Asian nation. Slow economic growth, diminishing incomes, and escalating living costs have coalesced to push many Thai families into financial distress. The survey, which polled 1,300 respondents between 1-7 September, revealed that a majority of households are struggling to service their existing loans and anticipate continued difficulties in the coming year.
University president Thanavath Phonvichai expressed concern over the long-standing nature of the debt crisis, stating, “We’ve faced debt problems for a long time and we can’t solve anything.” The situation is further exacerbated by a shift towards informal lending, with 30% of the average debt now sourced from non-traditional lenders – up from 20% in 2023. This trend is largely due to tightening credit policies by banks, forcing many lower-income families to turn to illegal loan sharks offering exorbitant interest rates.
The implications of this debt crisis extend far beyond individual households, casting a shadow over Thailand’s broader economic prospects. As the second-largest economy in Southeast Asia, Thailand is already contending with sluggish growth compared to its regional peers, compounded by decade-high borrowing costs and weak exports amid a slow recovery in its primary trading partner, China.
Government and central bank officials have expressed growing concern over the country’s total household debt, which stood at 16.4 trillion baht (US$484 billion) or 90.8% of GDP at the end of March 2024. This figure places Thailand among the highest in Asia for household debt relative to GDP. For context, International Monetary Fund data for 2022 shows household debt at 66.9% of GDP for Malaysia and 48.6% for Singapore.
The ripple effects of this debt crisis are already being felt across various sectors of the Thai economy. The Federation of Thai Industries has slashed its domestic vehicle sales target for the year by 200,000 units to 550,000, citing high household debt and stricter lending rules as major factors dampening demand.
In response to the escalating crisis, newly appointed Prime Minister Paetongtarn Shinawatra has pledged to stimulate the economy promptly. As part of these efforts, the government announced on Monday that it would distribute 145 billion baht (US$4.3 billion) through its “digital wallet” stimulus programme this month, earlier than initially planned, to support vulnerable groups.
Finance Minister Pichai Chunhavajira has emphasised the urgent need to address debt issues, calling for the central bank to assist retail borrowers and expressing intentions to engage with banks about providing further support to debtors.
