Thailand’s household debt soars as auto loans and cooperative debts spike

The secretary-general of the National Economic and Social Development Council (NESDC) issued a warning over the steady increase in Thailand‘s household debt. The critical areas requiring stringent monitoring were identified as auto loans and debt originating from savings cooperatives.

During a press conference outlining the nation’s social outlook for the second quarter of 2023, Danucha Pichayanan revealed that household debt in the first quarter had surged to 15.9 trillion baht, marking a 3.6% increase. This uptick shows a slight acceleration from the 3.5% rise seen in the previous quarter. Conversely, the household debt to GDP ratio showed a minor decrease, standing at 90.6%.

Danucha attributed the bulk of the first quarter’s household debt growth to real estate purchases and personal loans, which rose by 5% and 5.3% respectively compared to the previous quarter.

Touching on the overall debt serviceability, he highlighted that non-performing loans (NPLs) amounted to 144 billion baht at the end of March, corresponding to an NPL ratio of 2.68%. This indicates an increase from the 2.62% seen in the fourth quarter of 2022.

However, Danucha flagged two alarming trends within the household debt landscape. Firstly, the risk and volume of bad debt in auto loans show a propensity to rise. Evidence of this is the 30.3% surge in NPLs from auto loans in the first quarter of 2023 compared to the same period last year. Furthermore, the proportion of special mention loans to total loans has followed a similar upward trajectory.

Secondly, the demand for loans from savings cooperatives for personal use and debt repayment has shown consistent growth. Loans to cooperatives totalled 940 billion baht, with half being classified as non-productive loans.

Despite the Finance Ministry’s efforts to improve financial literacy regarding borrowing, finance, and debt management, the survey indicated a decline in financial literacy and access to financial services compared to 2020.

Employment figures for the second quarter stood at 39.7 million, marking a 1.7% increase from the previous year. This was attributed to a 2.5% employment surge in non-agricultural sectors. The hospitality industry recorded an 11.7% rise, reflecting the domestic economy’s recovery and increased international tourist arrivals. Other sectors, including construction, manufacturing, wholesale and retail, transportation and storage, reported growth rates of 6.0%, 0.3%, 0.5%, and 1.1% respectively.

Contrarily, the agricultural sector saw a 0.2% contraction in employment, largely due to drought conditions.

The unemployment rate for the quarter was 1.06%, equivalent to 430,000 individuals, marginally higher than the 1.05% of the preceding quarter but lower than the 1.37% rate of the same quarter in 2022, reported Bangkok Post.

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