Thailand’s household debt dips to 89.6% of GDP in Q2

Thailand’s household debt saw a slight decline in the second quarter as banks tightened lending practices to mitigate bad loans, and borrowers hastened debt repayments amidst the highest interest rates in a decade.

Data released by the Bank of Thailand (BoT) yesterday, September 30, revealed that nationwide household debt, as a percentage of gross domestic product (GDP), stood at 89.6% for the three months ending in June, down from 90.7% in the previous quarter. The total household liability amounted to 16.32 trillion baht (US$507 billion), a reduction from 16.36 trillion baht (US$504 billion) in the first quarter.

Over 75% of this debt was attributed to loans for personal consumption and mortgages, according to BoT data.

Prime Minister Paetongtarn Shinawatra has committed to a comprehensive debt restructuring plan aimed at addressing household indebtedness, as her administration rolls out measures to boost Thailand’s sluggish economy.

The country’s household debt, the highest in Southeast Asia, has been highlighted by the central bank as a key reason for maintaining the interest rate at 2.5%, the highest since 2013.

Thailand’s household debt has surged nearly 20% since 2019, as the US$500 billion economy has grappled with the lingering effects of the Covid-19 pandemic. The government, led by PM Paetongtarn, is offering 10,000 baht (US$310) in cash to approximately 14.5 million poor and disabled citizens to alleviate the cost of living pressures, stated Chayawadee Chai-Anant, BoT’s Assistant Governor.

“The slight decline in the debt ratio was the result of loan repayment and slowing credit growth at commercial banks.”

Chayawadee noted that a 2.3% GDP growth in the second quarter also contributed to the narrowing debt ratio, reported Bangkok Post.

Thai banks have adopted a more cautious stance in approving new loans, particularly for automobile financing, due to increasing defaults. The growth rate of new loans decelerated to 0.3% in the second quarter from 1.3% in the preceding three months, as reported by the BoT.

The central bank has also projected a further rise in non-performing loans, as small businesses and individual borrowers continue to face challenges in meeting repayment obligations.