Businesses are likely to find it difficult to get through the second half of this year, as people's purchasing power remains weak amid a high level of household debt, says the Employers' Confederation of Thai Trade and Industry (EconThai).
Though the Joint Standing Committee on Commerce, Industry and Banking has projected the Thai economy to improve in this year's second quarter due to state budget spending and a reduction in tension in the Red Sea region, Tanit Sorat, vice-chairman of EconThai, is not confident this will pave the way for a better economic outlook during the last six months of 2024.
"People's purchasing power is expected to remain weak as the country continues to struggle to deal with high household debt and the impact of non-performing loans [NPLs]," he said.
"This situation is a great risk to the economy and businesses which lack financial liquidity."
EconThai is worried about the rate of NPLs, which currently stands at 28% of total loans in the country. The higher rate has partly been driven by an increase in loans granted to motorists who use their car registration books to pawn their vehicle for cash, resulting in an increase of more than 40% in loans granted using this method.
According to the latest data from the National Economic and Social Development Council (NESDC), the country's household debt-to-GDP ratio of 90.9% as of the third quarter of 2023 is considered to be elevated and could restrict people's ability to spend.
The controversial 10,000-baht digital handout scheme should give a slight boost to the economy. EconThai expects it to spur GDP growth by only 0.8%.
"This is because the money will not circulate among sellers in traditional trade. The scheme tends to give an advantage to retailers in modern trade and convenience store operators," said Mr Tanit.
Traditional trade includes micro-retailers and hawkers.
NESDC has projected GDP growth to reach 2.7% this year.
Despite the slow rate of growth this year, EconThai is positive about foreign direct investment (FDI), driven by the electric vehicle business expansion of Chinese EV makers into Thailand. Their investment is expected to account for 25% of total FDI in Thailand, said Mr Tanit.