Thailand’s Household Debt Threatens Growth
Thailand’s growing household debt burden is becoming a major obstacle to the country’s economic growth. Global financial officials are preparing to gather in Bangkok for the annual meetings of the International Monetary Fund and World Bank.
Household debt in Thailand has reached 85.2% of GDP, one of the highest ratios in Asia. The debt burden has weakened household spending power. It has also made it more difficult for consumers and small businesses to invest and expand.
Debt weighs on Thailand’s growth outlook
The Bank of Thailand has warned that the household debt problem is one of the country’s major structural challenges. Thailand’s economy is expected to grow only 2.3% this year. The central bank estimates potential growth at around 2.7%.
The debt problem is not limited to traditional bank loans. The rapid expansion of digital credit and buy-now-pay-later services has also increased borrowing. The number of buy-now-pay-later accounts rose from 620,000 in 2021 to 6.3 million last year. The value of those loans increased from 6.8 billion baht to 40.7 billion baht.
Only around 5 million of Thailand’s 27 million borrowers are considered financially healthy enough to qualify for additional credit, according to a former chief of the National Credit Bureau.
IMF highlights structural risks
The IMF has previously warned that high household debt could constrain disposable income and reduce resources available for investment in human capital.
Thailand’s government is seeking to raise economic growth by attracting foreign investment into sectors such as semiconductors. Finance Minister Ekniti Nitithanprapas has said the government wants to reach 3% GDP growth within three years.
However, the scale of household debt remains a significant constraint. Rising living costs, higher energy prices and global economic shocks are making it more difficult for heavily indebted households to reduce their liabilities.
The issue is expected to receive additional attention during the IMF and World Bank meetings in Bangkok. Global officials will discuss economic growth, debt, AI and other challenges facing the global economy.
