Driven by government incentives for consumer credit and housing loans, 85% of Thai households are now in debt equal to 30% of their income without proper risk assessment. The Central Bank requests that the debt be placed back within the threshold of 80% of GDP to avoid risks to the general financial stability of the country.
Bangkok (AisaNews) – The weight of private debt worsens the prospects for recovery of the Thai economy. Over time, it has been fueled mainly by populist options that have disproportionately increased access to credit, while promoting initiatives to support consumption, for example, facilitating the distribution of credit cards, online shopping and the granting of mortgages for the purchase of homes. Many Thai families have thus seen the possibility of addressing expenses that were previously considered unattainable -those of housing and the car, in the first place- without calculating their possibilities or risks well.
Today, 85% of Thai households have debts equal to 30% of their labor income or deposits, with high chances of insolvency. The electoral policies and economic mismanagement of previous governments – but also of the military junta that has ruled since 2014 and the executive controlled by the military for five years – have encouraged household indebtedness. According to the new estimates that were published, indebtedness -which represented 59.3% of GDP in 2010- reached 86.9% in the last quarter of 2022, which was also confirmed for the first three months of 2023.
According to the National Council for Economic and Social Development, the weight of this debt is equivalent to almost 400,000 million euros per year, with growth in absolute terms of 3.5% compared to 2021, although with a slight decrease in percentage of national wealth. produced. This is a trend contrary to the average increase of 6% recorded in the last five years.
Analysts foresee a slight decrease between now and 2027, but still remaining above the limit of 80% in relation to GDP. The Bank of Thailand indicated this percentage as a limit to be reached to avoid long-term negative consequences, which could jeopardize the overall financial stability of the country.
As a consequence of the ongoing crisis exacerbated by the pandemic, in the short term higher interest rates and the already considerable debt burden will continue to weigh on the ability of people with less income to access new credit. But although this will “cool down” the debt race a bit, it will still have serious consequences for many citizens.
