Thailand’s household debt-to-GDP ratio declined to 85.9% in Q1/2026, the lowest level in six years, but this reflects borrowing constraints rather than stronger household financial positions.

Thailand’s household debt-to-GDP ratio declined to a six-year low of 85.9% in Q1/2026, but this has yet to reflect an improvement in household financial strength.

SCB EIC finds that the rapid decline in the household debt-to-GDP ratio in this quarter was driven by the following factors:

1. Households faced greater difficulty in accessing credit from mainstream financial institutions. Although household debt in Q1/2026 returned to modest growth of 0.5%YOY, up from near-stagnation in the previous quarter (0.05%YOY), the expansion was driven primarily by personal consumption loans. Meanwhile, credit extended by mainstream financial institutions continued to contract for more than two consecutive years, declining by around 2.1%YOY, reflecting persistently stringent lending standards. Lending by state-owned financial institutions provided some support to overall credit growth, in line with government measures aimed at maintaining liquidity and easing households’ financial burdens. However, its growth moderated to 1.6%YOY.

2. Households are increasingly turning to more accessible borrowing sources. Loans extended through pawnshops and savings cooperatives have continued to expand strongly, particularly pawnshop loans, which accelerated to 18.3%YOY. This reflects a shift by some households toward borrowing sources that offer more flexible terms and easier access, such as short-term loans secured by collateral at pawnshops, despite their higher financing costs. Loans from savings cooperatives also continued to expand by 5.0%YOY, as these lenders are relationship-based, have access to members’ income information, and operate clear repayment deduction mechanisms through the membership system. As a result, members can access credit more easily than loans from mainstream financial institutions. This trend suggests that household debt risks have not disappeared, but are instead shifting toward more accessible borrowing sources outside the mainstream financial system.

3. GDP expanded strongly by 2.9%YOY in 1Q/2026, supported by robust growth in private investment and exports. As a result, nominal GDP, which serves as the denominator of the household debt-to-GDP ratio, grew faster than household debt, causing the ratio to decline rapidly even though the value of household debt continued to increase and households’ debt-servicing capacity had yet to show a clear improvement.

Thailand’s household debt-to-GDP ratio is expected to continue declining, but this reflects “constraint-driven deleveraging” due to limited access to credit, rather than an improvement in households’ financial position.

SCB EIC assesses that Thailand’s household debt-to-GDP ratio will decline to 83.5–84.5% at end-2026, driven by three key factors:

1. Access to credit remains constrained, limiting household debt growth. Tight financial conditions and persistently stringent lending standards among financial institutions have made it difficult for households to access new credit, particularly retail loans from mainstream financial institutions. As a result, some households may increasingly turn to informal borrowing sources, while outstanding household debt is expected to continue expanding at a low rate.

2. Households are taking on less debt and becoming more cautious in their spending. A slow recovery in income, persistently elevated living costs, and economic uncertainty are weighing on debt-servicing capacity, prompting many households to delay taking on new debt, particularly loans for asset purchases or long-term investment. At the same time, some households need to reduce spending to preserve liquidity and meet their existing debt obligations.

3. Nominal GDP is expected to expand more rapidly amid rising inflationary pressures. Higher energy prices following the conflict in the Middle East are likely to accelerate inflation, resulting in stronger growth in nominal GDP, which serves as the denominator of the household debt-to-GDP ratio. This will cause the ratio to decline numerically, while households’ debt burdens and debt-servicing capacity remain fragile.

Looking ahead, the financial health of Thai households remains fragile, as reflected in four key developments:

1. The labour market has begun to weaken, as reflected in a higher unemployment rate, declining working hours, and a renewed contraction in average wages, placing greater pressure on household income and debt-servicing capacity.

2. Some household debt burdens may not yet be captured in the official household debt figures, particularly loans from village funds, urban community funds, and informal sources, on which low-income households are increasingly likely to rely.

3. Household loan quality remains an area that warrants close monitoring. Although loans classified as Stage 2 and Stage 3 have gradually improved, they remain elevated, reflecting tight financial conditions that continue to make it difficult for households to access new credit.

4. More than half of indebted households have insufficient income to cover their expenses, particularly low-income households, whose total expenditures, including debt repayments, continue to exceed their income.

Therefore, the observed decline in the household debt-to-nominal GDP ratio should not be viewed as a sign of stronger household financial positions. Rather, it reflects constraints on access to credit and an uneven recovery in household income, which may weigh on the recovery of consumption and the Thai economy in the period ahead.