Thai household debt drops to five-year low as new loans shrink

[BANGKOK] Thailand’s household debt level fell to the lowest since early 2020 after lenders tightened new loan approvals and government unveiled measures to provide relief to millions of borrowers.

The debt level as a ratio of gross domestic product stood at 87.4 per cent in the first quarter, down from 88.4 per cent at the end of last year, according to data published by the Bank of Thailand on Monday (Jun 30). An economic expansion of 3.1 per cent in the January-March quarter also helped cut the debt as a percentage of GDP, according to BOT Senior Director Pranee Sutthasri.

The debt in nominal terms fell marginally to 16.35 trillion baht (S$641.3 billion) at the end of March from 16.4 trillion baht three months earlier.

Thailand has the highest ratio of household debt in South-east Asia, a major factor holding back its economy from matching the pace of expansion of its neighbours. Prime Minister Paetongtarn Shinawatra’s administration last year announced debt-relief measures, targeted at about 1.9 million borrowers with total outstanding dues of 890 billion baht.

With the bulk of the Thai household loans in the personal consumption category, risk-averse commercial banks have tightened lending criteria for auto and other consumer loans. Overall bank loan portfolio contracted for the third consecutive quarter in the January-March period.

Thai banks, already weighed down by weak lending and rising bad debt amid fresh political turmoil, could be more vulnerable to profit erosion from US tariffs than their South-east Asian peers, according to Bloomberg Intelligence senior analyst Sarah Jane Mahmud. 

Though the banks have on average a 25 per cent exposure to trade-related sectors, the Thai economy is more reliant on US trade, with exports to the country up 89 per cent in 2019-2024, and now accounting for 18 per cent of all exports, Mahmud wrote in a note Monday. BLOOMBERG