The economic repercussions brought about by the COVID-19 pandemic resulted in many Thais not being able to get by on their regular income. As people in Thailand resorted to borrowing to meet daily expenses, household debt has been growing and this year the amount has increased by 11.5%. With an average household now more than 500,000 baht in debt, the level of household debt is now at its highest in 15 years.
University of the Thai Chamber of Commerce (UTCC) President Thanavath Phonvichai revealed the results of his university’s survey on the status of Thailand’s household debt in 2023. Carried out by the university’s Center for Economic and Business Forecasting (CEBF) and involving 1,300 respondents, the survey found that the household debt level had been rising since the years of the US-China trade war. The household debt situation was then exacerbated by the COVID-19 crisis which made the economy stagnate and impacted employment and people’s income levels.
Dr. Thanavath elaborated that many had to resort to borrowing to make ends meet, while Gen Y and Gen Z people were increasingly using money in advance of it being earned without appropriate planning. With income levels and the overall economy not recovering as much as expected, people’s debt burdens have increased. Household debts have grown by 11.5% this year and a Thai household is now 559,408 baht in debt, on average. 80.2% of the debt amount may be attributed to formal lending and 19.8% involves informal lending.
According to Dr. Thanavath, who is also the chief advisor to the CEBF, the household debt amount is expected to peak next year. This is because economic conditions for the latter half of 2023 remain uncertain, meaning people would still not have enough money to pay off debts and some may resort to borrowing more money. He said the Thai economy is growing in a K-shaped form, meaning not all segments of the economy are seeing equal growth. He explained that when exports were strong previously, the tourism sector was severely impacted. With the tourism sector now getting back on its feet, exports have slumped. He said the global economic slowdown is hampering the Thai economy’s recovery and delays to the formation of the new government would impact confidence, leading to even more economic pressure.
Nonetheless, the UTCC president expressed his belief the household debt level will drop to 80% of GDP within 5 years. He elaborated that the overall economic picture looks set to improve, and households will not create more debt under such circumstances. Households have also become increasingly indebted to formal lenders instead of non-formal ones. Owing to these developments, Dr. Thanavath viewed that the household debt issue will become a problem at the personal level as opposed to the level of the overall economy.
To address the household debt issue, Dr. Thanavath suggested implementing long-term measures such as low-interest loan sources, debt management education, promoting personal expenses management, and having financial institutes raise their criteria for borrowing to prevent people from creating more debts. (NNT)