Kasikorn Research Center (K-Research) has slashed its total loan growth projection for the banking industry in 2024 to 1.5% from an earlier forecast of 2.5-3.5%.
The downgrade is attributed to the reduced ability of borrowers to access credit, which aligns with slower economic growth.
In an updated assessment on Tuesday, K-Research now expects banks' lending expansion this year to be driven by business loans, with a growth rate of 1.5%, up from the previous forecast of 0.9-1.7%. In contrast, consumer loans are expected to post minimal growth, increasing by only 0.3%, down from an earlier projection of 3-3.7%.
Auto hire-purchase loans are projected to contract by 5.5% this year, a significant downturn from the previous outlook of 1-2% growth.
However, other consumer loan products, including mortgages, credit cards and personal loans, are expected to grow by 1.2%, 2.2% and 3%, respectively, according to the research house.
Kanjana Chockpisansin, head of banking and financial sector research at K-Research, said Thai banks have posted weak loan growth this year, in line with the country's sluggish economy and high household debt levels.
The downgrade is largely attributed to slower growth in retail loans, which account for 36.8% of the industry's total outstanding loans. This decline is primarily driven by auto loans, which are expected to contract for the second consecutive year, she said.
Demand for auto loans in the first half of this year was lower than expected, a trend expected to continue in the second half. The price war in the automotive market, especially among Chinese battery electric vehicle (EV) brands, has delayed purchasing decisions as consumers await lower EV prices.
"Weaker debt repayment capacity in the household sector is another significant factor contributing to the decline in consumer loan growth this year. Car buyers interested in internal combustion engine vehicles and homebuyers looking at properties priced between 3-5 million baht face higher loan rejection rates," Ms Kanjana said.
Thailand's rising household debt is expected to further restrict consumer access to loans, especially for big-ticket items such as vehicles and homes. K-Research predicts the country's household debt-to-GDP ratio will decline slightly to 90.7% this year, down from 91.4% last year, based on higher GDP growth.
Ms Kanjana said banks' tighter loan criteria, in response to higher credit risk among both retail and business borrowers, will further limit new loan approvals.
In the second quarter, total outstanding loans in the banking sector contracted by 0.2% year-on-year. Business and consumer loans declined by 1.3% and 0.03%, respectively, while government loans and business loans saw higher debt repayments, according to K-Research.