Household debt was found to have increased by 11.5% this year over 2022, the highest level in 15 years, with the rate expected to peak next year if the economy fails to fully recover, according to the latest survey by the University of the Thai Chamber of Commerce (UTCC).
Thanavath Phonvichai, president of the UTCC, said the recent survey on the status of household debt this year revealed that most families had lower incomes than expenses.
"This situation arose due to economic problems in Thailand since the pandemic began, coupled with the earlier challenges from the China-US trade war. The impact of the trade war led to a downturn in exports, affecting various sectors, including workers in the agricultural and industrial sectors," he said.
"The pandemic further aggravated the situation, with nationwide shutdowns before a slow recovery in tourism in the previous year. Hence, it is not surprising that the economy has yet to fully recover."
According to Mr Thanavath, this year exports are expected to weaken in line with the sluggish global economic conditions, leaving tourism to play a pivotal role in the country's recovery.
Nevertheless, he said farmers are seeing an improvement in crop prices, leading to alternating growth patterns for the economy, known as a "K-shape" recovery.
As a result, the issue of household debt has not been significantly tackled, with people's income increasing much less than the rising production costs due to higher inflation at the beginning of the year, peaking at 5-6%, and expensive electricity costs in April and May.
"Many households find their incomes insufficient to cover expenses, resulting in reduced savings and an inability to save money. This situation has persisted since 2020 and continues to the present."
According to Mr Thanavath, the average household debt is 559,408 baht, up by 11.5% from the previous year. Within this figure, some 80% of the debt is within the formal financial system, while the remaining 20% is informal debt.
Household debt stems from financial indiscipline, insufficient income to cover expenses, investment mismanagement and inadequate financial knowledge.
Mr Thanavath said although the current household debt may reach up to 90% of GDP, the trend of higher GDP and the recovering economy in the coming year, households' unwillingness to accumulate more debt and an increase in formal debt, household debt is evaluated as not posing a severe risk to the overall economy and is considered an individual problem.
The Bank of Thailand and financial institutions are working towards finding practical solutions to address this issue. It is expected that household debt could decrease to around 80% of GDP, he said.
"The household debt situation in 2023 is the highest in the past 15 years, primarily due to the trade war, geopolitical conflicts, the pandemic and slower than expected economic recovery which has led people to incur more debt for daily expenses," said Mr Thanavath.
"Household debt will likely peak in 2024 since the economic outlook is uncertain, especially with the delay in setting up a new government. This could lead to a 'loss year' in the coming year if stimulus measures are not effectively implemented in the fourth quarter and the following half of the year."