Bangkok, Thailand – The COVID-19 pandemic has wreaked havoc on Thailand’s economy, leaving many citizens struggling to make ends meet on their regular incomes. As a result, households across the country have increasingly turned to borrowing to meet their daily expenses, leading to a significant surge in household debt by 11.5% this year. Now, with the average household debt exceeding 500,000 baht, the nation faces its highest level of indebtedness in 15 years.
These alarming findings were unveiled by Dr. Thanavath Phonvichai, President of the University of the Thai Chamber of Commerce (UTCC), based on a comprehensive survey conducted by the university’s Center for Economic and Business Forecasting (CEBF). The survey involved 1,300 respondents and revealed that household debt has been on the rise since the US-China trade war years, exacerbated further by the COVID-19 crisis, which stalled the economy and impacted employment and income levels.
Dr. Thanavath explained that a considerable number of Thais were compelled to borrow money to make ends meet, and younger generations, including Gen Y and Gen Z, were increasingly relying on advanced money without proper financial planning. The sluggish recovery of income levels and the overall economy contributed to the growing burden of debt on individuals and households. On average, a Thai household now finds itself burdened with 559,408 baht in debt, of which 80.2% results from formal lending channels and 19.8% from informal sources.
The UTCC president, who also serves as the chief advisor to the CEBF, predicts that the household debt will peak next year. The uncertainty in economic conditions for the latter half of 2023 implies that people may still not have sufficient funds to pay off their debts, leading some to resort to additional borrowing. Dr. Thanavath highlighted that the Thai economy is experiencing K-shaped growth, wherein certain sectors recover while others lag. For instance, when exports were thriving, the tourism sector suffered, and now that tourism is rebounding, exports have slumped. This global economic slowdown, combined with delays in forming a new government, is amplifying the pressure on Thailand’s economy.
However, despite the challenging outlook, Dr. Thanavath remains optimistic that household debt will eventually decrease to 80% of GDP within the next five years. He believes that as the overall economic situation improves, households will be less inclined to accumulate more debt. Encouragingly, households are also turning more towards formal lenders rather than non-formal ones. Dr. Thanavath emphasized that the household debt issue should be tackled at a personal level rather than as a systemic problem.
To address the mounting household debt problem, Dr. Thanavath proposes implementing long-term measures. These include providing low-interest loan sources, enhancing debt management education, promoting personal expense management, and urging financial institutions to tighten their borrowing criteria to prevent individuals from plunging deeper into debt. By taking proactive steps and fostering financial literacy, Thailand can hope to alleviate the burdens of household debt and foster a more resilient economy in the future.