UTCC warns of high levels of household debt

According to the UTCC's 2024 Survey on the Status of Thai Households, the average debt burden per household has increased by 8.4% to 606,378 baht from the previous year. Informal debt accounts for 69.9% of this total, while formal debt represents 30.1%.

The survey, based on responses from 1,300 people nationwide, found that nearly half of respondents had never saved for emergencies. Only 22.6% had sufficient savings to cover expenses for six months or more. Furthermore, 46.3% of respondents reported having less household income than expenditure.

When asked about coping strategies for insufficient income, the most popular response was borrowing from various sources. Saving or reducing expenses, withdrawing savings, and earning more income were also common approaches. Credit cards were the preferred method of borrowing, followed by loans from commercial banks and specialised banks.

The survey also found that many respondents (46.4%) believed that their debt had increased at a faster rate than their income. Credit-card debt was the most common type of debt, followed by vehicle debt, personal debt, housing debt, business debt, and education debt.

The primary reasons for increased debt cited by respondents included insufficient income, unexpected expenses, rising living costs, increased family financial burdens, investment losses, business expansion, increased purchases of fixed assets, increased credit-card spending, education costs, and job loss.
 

A significant number of respondents (71.6%) admitted to missing instalments or defaulting on their debts. The most common factors contributing to debt default were economic conditions, decreased income, reduced household liquidity, falling agricultural prices, rising living costs, and limited access to additional loans.

The Bank of Thailand reported that household debt levels in the first quarter of 2024 stood at 90.8% of GDP, slightly lower than the previous quarter thanks to a slowdown in household lending.

Experts Urge Government Action

Thanawat Polvichai, president of the UTCC's Centre for Economic and Business Forecasting, stressed the importance of addressing household debt. He said that while high debt levels are not a major threat to the economy, they may have psychological consequences for individuals and households.

"Thailand's household debt has been neglected, resulting in a debt level of more than 90% for more than a decade. As a result, now is the time to seriously consider solving the problem," he said. 

However, he emphasised that high household debt does not preclude the country from progressing and does not always harm the economy if it benefits people, such as debt for occupation investment or debt to purchase family wealth such as houses or cars. 

He then urged the government to examine carefully the composition of household debt, particularly the percentage of informal debt converted into formal loans. This information would be useful in determining the severity of the problem and informing policy responses.

The UTCC estimates that the Thai economy has the potential to grow by 3.5-4% by 2025, fuelled in part by momentum from the digital wallet project, which will initiate government payments to vulnerable groups in September and continue into early 2025. 

Additionally, consumer spending during the Chinese New Year, Valentine's Day, and Songkran holidays is expected to support economic growth.