Massive Debt in Thailand Burdens its Economy

Massive Debt in Thailand Burdens its Economy

Rising consumer debt in Thailand is still a major source of risk for the Southeast Asian market, even with GDP growth at its lowest level in nearly a decade.

Thai household debt accelerated rapidly, largely because of tax breaks on car and housing purchases. More recently, consumer lending growth in Thailand slowed to well-below 5% in recent years.

Yet despite Thailand’s slower household credit growth during the past seven years, consumer debt in the “Land of Smiles” remain among Southeast Asia’s worst leading into 2024.

It’s now reached the level of a serious concern, with Thai consumer debt climbing to over 90% of household assets on average.


Debt in Thailand: Domino Effect?

Fitch noted on the matter ”while the slowdown in household debt growth is positive, leverage is still likely to stay high in the short to medium term. Consumer loan demand is unlikely to be materially below GDP”.

High leverage leaves Thai consumers sensitive to macroeconomic weakness. With challenging headwinds coming from China as the world’s second biggest economy takes a pause, this risk is unlikely to end anytime soon.

Likewise, further asset quality deterioration will almost surely occur. The exact degree depends on Thailand’s future economic growth rate and unemployment. Lower-income households are more vulnerable, of course.

Here’s some positive news for Thailand though: according to Fitch, large commercial banks like Bangkok Bank (BBL) and Siam Commercial Bank (SCB) are well-positioned to weather any asset quality stress.

These banks should thrive because of their better customer profiles and healthy capital bases, combined with asset quality buffers.

Regardless, escalating delinquencies, exposure to vulnerable low-income segments, and generally weak economic growth in Thailand have the potential to seriously disrupt the nation’s banking sector.


Lenders in Thailand have held loose requirements for mortgages and cars, leaving millions of consumers with debt they cannot pay back.

Fed Rates Prompt a Thai Bank Outflow

It’s also important to remember that the fate of Thailand’s banking sector no longer relies on the Thai economy alone.

Our world is now interconnected. During the 21st century, this trend will only strengthen further.

As an emerging market economy, Thailand isn’t exempt from any global financial shocks. Higher rates would certainly reduce Thailand’s capital outflows and export numbers.

Meanwhile, the Fed is finally raising rates again for the first time since 2008, and the Thai central bank will most likely have to follow along. 

This will only put more pressure on consumer debt in Thailand and the nation’s financial sector. Both of them are already suffering heavily, quite frankly.


Skip the Next Western Recession

Learn the best places to invest - and where to avoid - by downloading our free Investment Cheat Sheet.


Join 50,000+ monthly readers. Discover property, stocks, and other investments that will drive global growth in the 21st century.