Thailand’s household debt to GDP ratio stood high at 89.3% in Q3/2021. Eyes on Omicron impacts and surging informal credits—the two key risks ahead to household debt outlook.

The Bank of Thailand announced that Thai household debt rose 4.2%YOY to THB 14.3 trillion in Q3/2021. The growth was slower than Q2, but the household debt to GDP ratio remained high at 89.3%.

In Q3/2021, commercial banks’ lending to households saw a decelerating growth in all primary sources. Yet, personal loan growth kept swelling high on the back of household liquidity demand to offset income loss due to COVID-19 impact.

Informal debt will likely become an alarming risk ahead, as more households, particularly the fragile low-income group, seek loans to cover living expenses but are often barred by lacking access to the formal credit market.

Thailand’s household debt to GDP ratio might surge again in H1/2022, given mounting risks from Omicron outbreaks which will take a toll on household income and trigger an increase in loan demand to compensate for liquidity loss. As a result, household deleveraging would face hindrances while financial condition will recover at a slower pace. This way, outlook for consumption expenditure and credit quality worsen.

Government support will still play a vital role in providing solace for the vulnerable Thai household sector. These policy supports could come in the form of debt restructuring, income reliefs, employment supports, labor upskilling and reskilling to enhance earning potentials, and liquidity injection to ward off risks from informal debt dilemmas.