According to the Bank of Thailand's 2Q20 household debt report, Thailand's outstanding household debt hit an 18-year high of 83.8 percent of GDP, rising from the 80.1 percent of GDP recorded during 1Q20. On a quarter-on-quarter basis, 2Q20 outstanding household debt increased THB92.2 billion, over the THB12.0 billion reported for 1Q20, led by specialized financial institutions and commercial banks. A surge in household debt in contrast to the shrinking economy caused by COVID-19 shows that Thailand will unlikely be able to break this vicious cycle anytime soon. This may result in a broad-based deterioration in the financial health of overall Thai households, in particular those experiencing uncertainties about future income and employment.
KResearch is of the view that Thailand's hefty household debt reflects two opposite sides. While some household segments have incurred new debt, such as home loans, the others are struggling with liquidity problems and need assistance from financial institutions.
Regarding the outlook of Thailand's household debt in 2020, KResearch views that high household debt reflects a weakness in Thailand's economic structure. We expect household debt will increase to a range of 88-90 percent of GDP in 2020, rising over the 83.8 percent of GDP recorded in 2Q20, because the Thai economic performance may contract at a steeper pace during 2Q20, and household debt will continue to grow, albeit at a slower pace than in 2019. The deteriorating debt servicing ability of many households, caused by unfavorable economic conditions, is an important issue that warrants close monitoring. Although assistance measures for retail borrowers and low interest rates may help alleviate borrowers' debt burden, the future income and employment of households are important factors that will determine their credit quality, especially debt servicing ability.