Kasikorn Bank has issued an estimate that household debt in Thailand will increase to 89 percent of GDP this year because of the government’s economic stimulus policy and various loan schemes made available by financial institutions.
The Research Centre of the Thai bank attributed the growth of household debt to an increase in loans granted by banks to middle-income earners, saying that this group of people would make up the largest portion of debtors.
Encouragingly, according to the bank, the fact that most household debt will be incurred by middle-class people does not mean the country is facing a serious problem of collective debt. Most of the loans granted to this type of borrowers are intended for buying houses and business expansion, which are both in line with the government’s economic policy.
The government’s adoption of various measures to address the problem of informal loans, including the transfer of debts with loan sharks to financial institutions and the promotion of nano-financing, is also pushing up the amount of household debts.
Kasikorn Bank, however, cautioned relevant agencies to give special attention to low-income earners, who previously made up the majority of debtors, as the higher cost of living, which had now outgrown their income, might affect their ability to repay debts.
The Bank of Thailand said it was keeping a close watch on the situation
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
