Kasikorn Research Center (K-Research) forecasts household debt-to-GDP will decline to 84-86.5% this year from 86.8% in 2022.
Rising interest rates should make individuals more cautious about applying for new loans, said the research house.
K-Research estimates the household debt-to-GDP ratio would drop for the second straight year, from 86.8% in 2022 after the ratio peaked at 90.1% in 2021.
Retail loan growth in the banking industry is expected to tally 3.7-4.8% this year, declining from 6% on average over the past five years.
"Increasing interest rates should be key in forcing individuals to be more prudent in applying for new loans, especially mortgages and auto loans, which involve large debt amounts and are long-term," according to K-Research.
In addition, regulatory agencies have been paying more attention to reducing the country's swelling household debt and containing new loan creation.
The central bank is expected to implement new regulations to supervise new loan creation and tackle existing debt.
Sukhumvit Asset Management (SAM), Thailand's second-largest asset management company, which operates the Bank of Thailand's Debt Clinic, is allowing borrowers who were classified as new non-performing loan (NPL) clients before Feb 1 this year to apply for the debt scheme.
Recently the programme was made available for NPL borrowers who were classified as having bad debt before Sept 1, 2022.
The pandemic affected the debt payment ability of vulnerable retail borrowers and they were classified as new NPL clients. The adjusted condition help more of them make use of the clinic, said SAM president Tharatporn Techakitkachorn.
The Debt Clinic offers attractive interest rates for a debt restructuring programme in the range of 3-5% per year, with a maximum debt restructuring period of 10 years.
Debt restructuring in the clinic covers only unsecured loan products such as personal loans and credit cards.
There are three options for the debt restructuring programme.
For debt restructuring for four years or less, the interest rate is 3%.
The rate for debt restructuring for more than four years and up to seven years is 4%, while more than seven years to 10 years the rate is 5%, he said.
Recently central bank assistant governor Suwannee Jatsadasak said the regulator is drafting responsible lending guidelines to improve loan quality in the financial system, targeting reducing the household debt problem.
The regulator wants to reduce the ratio of the country's household debt-to-GDP to a ceiling of 80% in the long term.