Household debt growth slowed in the first quarter of 2024, partly due to financial institutions tightening their loan extension criteria, according to the National Economic and Social Development Council (NESDC).
Danucha Pichayanan, the NESDC secretary-general, said household debt reached 16.3 trillion baht in the first quarter of 2024, representing a 2.5% growth, which eased from the 3% growth recorded in the previous quarter. This amounted to 90.8% of GDP, down from 91.4% in the previous quarter.
Household debt growth slowed across almost all types of loans, partly due to the high level of household debt and declining credit quality, leading financial institutions to become stricter about approving loans for households.
The quality of household loans has continued to deteriorate. Non-performing loans (NPLs) for consumer credit at commercial banks amounted to 163 billion baht, representing 2.99% of total loans, up from 2.88% in the previous quarter. This marks a continuous increase for the fifth consecutive quarter.
According to Mr Danucha, there are two key issues to address: firstly, the urgent need to restructure debt for credit cardholders struggling to make payments after the Bank of Thailand increased the minimum payment from 5% to 8% from the January 2024 billing cycle -- this adjustment caused some borrowers to struggle to adapt and face repayment challenges; secondly, diverse forms of informal lending, especially via social media channels, along with easy access to loans, which may lead to excessive debt accumulation.
Additionally, the high interest rates associated with informal lending, particularly among younger people, pose a risk of unmanageable debt.
In a related development, the NESDC also reported that the unemployment rate in the first quarter of this year increased slightly to 1.07%, representing 430,000 people.
Key issues to monitor in the future include the need for workers to adapt their skills to align with future labour demands.
The World Economic Forum predicts that by 2027, over 42% of jobs in the business sector will be automated.
A survey conducted by Microsoft Thailand in collaboration with LinkedIn found over 74% of Thai executives are reluctant to hire employees lacking AI skills.
The impact of the liquidity shortage among small and medium-sized enterprises (SMEs) and increasing economic risks on employment also warrant close monitoring.
SMEs, which account for a large share of the workforce, are facing liquidity problems, with NPLs reaching 7.2% of total loans in the fourth quarter of 2023, nearly doubling from the same period a year earlier.
Moreover, the cost index for micro and medium-sized businesses has increased, which could lead to job cuts.
According to the state planning unit, another key issue is the impact of the floods on agricultural production and farmers' incomes. Recent floods alone damaged 308,238 rai of farmland.
It is expected that from mid-July to September, 60% to 80% of Thailand will experience thunderstorms, posing a risk to the agricultural sector's production.
This could negatively impact farmers' income, increase production costs and affect farmers' ability to repay their debts, the NESDC said.