The Bank of Thailand anticipates a further decline in the country's household debt-to-GDP ratio, supported by the Thai economic recovery and slower loan growth.
According to central bank governor Sethaput Suthiwartnarueput, Thailand's household debt-to-GDP was 90.9% in the first quarter this year, slightly reduced from the previous quarter. This decline was mainly attributed to the country's economic recovery, he said.
Central bank data indicates total household debt after seasonal adjustments amounted to 16.4 trillion baht, or 90.9% of GDP, in the first quarter of 2024, compared with 91.0% in the previous quarter and 90.8% in the first quarter of 2023.
The central bank expects the momentum of the Thai economy to continue to pick up, with projected growth of 2%, 3% and 4% in the second, third and fourth quarters of this year, respectively, on a year-on-year basis. This follows 1.5% growth in the first quarter.
Mr Sethaput said the banking industry's loan growth has slowed, in line with a debt deleveraging cycle in the post-pandemic period, along with higher credit risk in certain borrower segments. In the household segment, auto loans have declined partially because of challenges in the automobile industry.
In the first quarter this year, car and motorcycle loans tallied 1.76 trillion baht, down from 1.80 trillion year-on-year, according to the regulator's household debt data.
The country's automotive sector faces structural and cyclical challenges that vary by vehicle segment.
Used car prices have dropped by around 40% year to date, while a price war in the electric vehicle market has delayed consumer purchasing decisions, dampening auto loan growth, according to the central bank.
"With an economic recovery and lower loan growth, we expect the household debt-to-GDP ratio to continue decreasing," said Mr Sethaput.
However, the central bank remains concerned about small and medium-sized enterprises (SMEs) amid the lower loan growth cycle. Credit risk for the business segment, especially small SMEs, has increased, making it harder for them to access loans.
Banks' returns on small SME loans are 8-10%, compared with a total cost of 11-13%. Higher expenses are largely attributed to credit costs, which range from 8-10%, while funding and operating costs are each around 2-3%, according to the central bank.
Loan guarantee mechanisms and open data systems are seen as instruments that could improve loan access for small SMEs, and the central bank is working in this direction, he said.
Mr Sethaput said the central bank is also concerned about increased competition from Chinese goods, which is weakening the competitiveness of local SMEs, a challenge faced by other countries as well.
