Thailand household debt topped 14 trillion baht in the fourth quarter of 2020 and reached the highest record in the past 18 years, says Kasikorn Research Center yesterday, April 6th.
The household debt is accounted for 89.3 percent of the GDP in 2020. However, the debt level in 2020 only rose to 3.9 percent and marked the lowest growth rate in four years, reflecting that both borrowers and lenders are increasingly cautious during the economic activity disruption due to the Covid-19 pandemic.
Kasikorn Research Center also added that despite the economic trends, household credit continues to grow among two particular groups. The first group is household loans for purchasing real estate, housing, and cars. They are likely to be a group with moderate to high purchasing power whose income was not much affected by the Covid-19 situation.
The second group is household loans for liquidity and/or business. They are likely to be a group with unstable income and a weakening financial status in line with the economic trends.
Moreover, the household debt of borrowers’ debts and savings also significantly declined due to the impact of the COVID-19 crisis. The Debt Service Ratio (DSR) of retail borrowers was reportedly at 44.1 percent of an individual’s monthly income at the beginning of 2021 while the DSR of borrowers with income problems was at 43.8 percent. This also proves that the debt burden of both groups was higher than the average DSR in the past years.
As for the economic forecast in 2021, Kasikorn Research Center estimates that the gradual recovery of economic activity after the Covid-19 pandemic is likely to make household loans in 2021 likely to grow higher than 2020’s growth of just 3.9 percent. The economic recovery might also help lift the range of GDP to approximately 91.0 percent in 2021, compared with 89.3 percent in 2020. The Thai authorities may need to take a serious responsibility to take care of the household debt problem when the COVID19 crisis ends, Kasikorn Research Center added.
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