Thailand's household debt reaches record high amid slow economic growth

Thailand's household debt has soared to a record high, with many citizens struggling to manage loan repayments due to weak economic growth, declining incomes, and rising living costs, according to a recent survey. The study, conducted by the University of the Thai Chamber of Commerce (UTCC) in early September, revealed an average household debt of 606,378 baht (S$23,600), marking an 8.4% increase from the previous year. This is the highest level of household debt recorded since the survey began in 2009. The survey highlighted that 69.9% of this debt is attributed to formal lending, a decrease from 80.2% last year, while informal lending has risen to 30%. This shift is largely due to many individuals reaching their borrowing limits from formal financial institutions, forcing them to seek credit from informal sources such as loan sharks. The study also noted that a significant number of households are facing difficulties meeting their financial obligations, with monthly debt payments averaging 18,787 baht, up from 16,742 baht the previous year. The delinquency rate stands at 71.6%. The growing household debt is placing pressure on Thailand's economy, the second largest in Southeast Asia, which is already grappling with high borrowing costs and sluggish exports amid a slow recovery in China, its main trading partner. Both the government and the Bank of Thailand have raised concerns over the country's total household debt, which reached 16.4 trillion baht, or 90.8% of gross domestic product (GDP), at the end of March 2024—one of the highest levels in Asia. The central bank has introduced measures aimed at reducing this ratio to 89% by next year. For comparison, International Monetary Fund (IMF) data from 2022 shows household debt as a percentage of GDP at 67% in Malaysia and 48.6% in Singapore. The UTCC survey, which polled 1,300 respondents from 1-7 September, found that the majority had experienced challenges repaying debt over the past year and expected to continue facing difficulties in the coming year. UTCC President Thanavath Phonvichai expressed concern over the long-standing debt problem, stating that household debt is primarily incurred for daily expenses, housing, vehicles, and business operations, and does not necessarily undermine the overall economy. He added that the situation would improve once the domestic economy returns to strong growth. In response to the debt crisis, the Federation of Thai Industries has reduced its 2024 target for domestic vehicle sales by 200,000 units to 550,000, citing high household debt and stricter lending conditions as key factors reducing demand. Finance Minister Pichai Chunhavajira emphasized the urgency of addressing household debt and urged the Bank of Thailand to provide more support to retail borrowers. He also mentioned plans to engage with banks to explore further assistance measures for debtors. Thailand's newly appointed Prime Minister, Paetongtarn Shinawatra, has pledged to stimulate the economy immediately. On Monday, the government announced plans to distribute 145 billion baht to state welfare cardholders starting next week. This is part of a broader “digital wallet” program aimed at providing financial relief to up to 50 million people, although it now appears much of the support will be disbursed in cash.