Average household debt in Thailand has reached a record high due to slow economic growth, lower incomes and high living costs, and people are having trouble servicing their loans, a survey showed on Tuesday.
The average debt per household was 606,378 baht, up 8.4% from the previous year, according to the survey by the University of the Thai Chamber of Commerce conducted in early September. It was the highest figure since the survey began in 2009.
It found that 69.9% of the debt is from formal lending, down from 80.2% last year, while 30% is from informal lending. The proportion of informal lending increased because more people reached their credit limits for formal lending, causing them to turn to loan sharks, noted the survey.
Many consumers have insufficient income to cover expenses, unexpected financial emergencies and living costs, according to the university.
Monthly debt payments averaged 18,787 baht per month, up from 16,742 baht last year, with a delinquency rate of 71.6%, the survey found.
The debt has weighed on Southeast Asia’s second-largest economy. Growth has lagged regional peers as it also faces decade-high borrowing costs and weak exports amid a slow recovery in top trading partner China.
The government and the Bank of Thailand have expressed concerns over the country’s household debt of 16.4 trillion baht, or 90.8% of gross domestic product (GDP) at the end of March 2024, among the highest in Asia.
The central bank has outlined a series of measures it hopes will bring the household debt ratio down to 89% of GDP by next year.
International Monetary Fund data for 2022 shows household debt at 67% of GDP in Malaysia and 48.6% in Singapore.
The university's survey of 1,300 people conducted from Sept 1-7 found a majority of respondents had problems with debt servicing over the past year and would face the same problem over the next year.
“We’ve faced debt problems for a long time and we can’t solve anything,” university president Thanavath Phonvichai told a briefing.
Despite the rising debt rate, he noted, most household debts were for daily expenses, purchases of durable goods such as houses and vehicles, and conducting business, meaning they are not undermining the economy.
“Household debt will improve once the domestic economy recovers to strong growth,” he said.
The Federation of Thai Industries has slashed its domestic vehicle sales target for this year by 200,000 units to 550,000, saying that high household debt and tighter lending rules were hitting demand.
Finance Minister Pichai Chunhavajira has said there is an urgent need to fix debt problems. He has said the Bank of Thailand should assist retail borrowers, and that he would talk with banks about providing further assistance to debtors.
New Prime Minister Paetongtarn Shinawatra, who took office last month, has promised to stimulate the economy right away.
The government said on Monday that it would distribute 145 billion baht to state welfare cardholders starting next week.
The handout is first phase of a flagship “digital wallet” programme that could eventually cover 50 million people, though it now appears that most of the money will be given out in cash.