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17 Jan 2020

Financial Institutions

Household debt in 2020 may exceed 80% of GDP: closely monitor debt service ability of Thai household groups (Current Issue No.3073)

              Thailand's household debt continued to surge amid the slowing economy as the size of the household debt relative to GDP rose to 79.1 percent in 3Q19, the highest in almost three years. The high level of household debt nationwide is consistent with KResearch's survey on household debt and savings in 2019 which found that 44 percent of borrowers and indebted households have more debt burden or borrowed more.

          ​ KResearch's latest survey also shows that most borrowers-households have taken more than one loan concurrently. A majority of them have to service 2-3 loans at the same time (compared to the previous survey result which showed that they were obliged to pay installments for 1-2 loans concurrently). In addition to credit card debt, these borrowers have incurred more debt from auto loans, personal loans and housing loans, respectively. KResearch's survey also shows that several groups of borrowers-households have higher debt service ratio (DSR), especially the Gen Y segment and people earning less than 15,000 Baht/month, whose proportion of DSR reached 42.0 and 42.7 percent, respectively (higher than the DSR of overall demographic groups at 39.4%). The findings are in line with the country's aggregate data, reflecting that these demographic groups of borrowers-households must be more cautious in their spending to avoid creating more debt.

            Regarding the household debt outlook in 2020, KResearch projects that household debt may increase at a faster pace than economic growth. Hence, there is a possibility that the proportion of household debt to GDP in 2020 may move up to 80.0-81.5 percent. Therefore, issues that deserve close monitoring are prospective guidelines to oversee and fix high household debt, which is a difficult question to tackle during the lackluster economy. KResearch views that an attempt to understand the root cause of household debt by studying the aggregate  data may not lead to a complete solution to fix the problem because the real cause of the problem of debt and debt service ability of each household is different. Moreover, loans of some household groups are not reflected in data base in the system, especially those with irregular income or odd jobs and low-income borrowers, who may not access loans from financial institutions in the system.

Financial Institutions