Thailand bank loan growth forecast cut to 1.5% for 2024

Kasikorn Research Centre (K-Research) reduced its overall loan growth projection for the banking industry in 2024 to 1.5%, down from the earlier forecast of 2.5-3.5%. This adjustment reflects borrowers’ diminished ability to access credit amid slower economic growth.

K-Research’s updated assessment, released yesterday, August 13, indicates that banks’ lending expansion this year will be primarily driven by business loans, with a growth rate of 1.5%, up from the previous forecast of 0.9-1.7%. In contrast, consumer loans are anticipated to see minimal growth, increasing by just 0.3%, a significant decrease from the earlier projection of 3-3.7%.

Auto hire-purchase loans are expected to contract by 5.5% this year, marking a sharp downturn from the previous outlook of 1-2% growth. However, other consumer loan products, such as mortgages, credit cards, and personal loans, are projected to grow by 1.2%, 2.2%, and 3%, respectively.

Kanjana Chockpisansin, Head of Banking and Financial Sector Research at K-Research, noted that Thai banks have experienced weak loan growth this year, consistent with the country’s sluggish economy and high household debt levels.

The downgrade in loan growth projections is largely due to slower growth in retail loans, which constitute 36.8% of the industry’s total outstanding loans. This decline is primarily driven by auto loans, which are expected to contract for the second consecutive year.

Demand for auto loans in the first half of this year has been lower than expected, a trend that is expected to continue into the second half. The competitive price war in the automotive market, particularly among Chinese battery electric vehicle (EV) brands, has delayed consumer purchasing decisions as buyers wait for lower EV prices, Kanjana said.

“Weaker debt repayment capacity in the household sector is another significant factor contributing to the decline in consumer loan growth this year. Car buyers interested in internal combustion engine vehicles and homebuyers looking at properties priced between 3-5 million baht face higher loan rejection rates.”

GDP growth

Thailand’s rising household debt is expected to further restrict consumer access to loans, particularly for big-ticket items such as vehicles and homes. K-Research predicts the country’s household debt-to-GDP ratio will slightly decline to 90.7% this year, down from 91.4% last year, based on higher GDP growth.

Kanjana mentioned that banks’ tighter loan criteria, in response to higher credit risk among both retail and business borrowers, will further limit new loan approvals.

In the second quarter, total outstanding loans in the banking sector contracted by 0.2% year-on-year. Business and consumer loans declined by 1.3% and 0.03%, respectively, while government loans and business loans experienced higher debt repayments, according to K-Research.

The overall picture suggests that the Thai banking industry’s growth is being hampered by a combination of economic slowdown, rising household debt, and tighter lending criteria. These factors are likely to continue influencing the sector’s performance in the near future, reported Bangkok Post.