According to the Bank of Thailand's latest report on loans to households during 3Q20, Thailand's household debt remained at a high level and is projected to rise steadily amid weak economic conditions. The household debt to GDP ratio hit a new 18-year high of 86.6 percent in 3Q20, driven by new home loans, loans to start a business, auto hire-purchase and consumption loans such as credit card and personal loans.
Looking into 2021, the new wave of COVID-19, which is expected to derail the economic recovery, will likely hurt the financial position of retail borrowers, who already received financial assistance from financial institutions. Although the information before the new wave of COVID-19 shows that retail borrowers of commercial banks will be able to repay debt as usual after the expiration of relief measures and certain borrowers have already received assistance from commercial banks via debt restructuring, KResearch views that close attention must be paid to economic risk that may arise around early 2021 because it may significantly affect the income and debt servicing ability of households.
We also expect that household debt will increase to 91.0 percent of GDP or even higher in 2021 if the impact of COVID-19 on the Thai economy is more severe than expected, thus causing the 2021 GDP to grow at less than the base case of 2.6 percent. The steady rise in household debt is one of the indicators of Thailand's structural problems and the financial fragility of Thai households, which need to be addressed after the COVID-19 pandemic has eased, and the Thai economy has bounced back. Meanwhile, an immediate challenge for commercial banks is to put financial assistance in place in order to help borrowers (both businesses and households) to weather this difficult time.