Thailand is currently facing a problem with citizens lacking savings, while household debt continues to rise every year. Since 2011, household debt has surged due to car loans from the first car tax refund scheme, marking a peak in household debt levels.

Additionally, other contributing factors have led to the increase in household debt, such as loans for home repairs following the 2011 floods and increased competition among financial institutions to offer personal loans to the public.

By 2013, household debt growth began to slow down in line with the economic downturn and stricter lending policies from financial institutions. Nevertheless, household debt still soared to 88-90%. The Thai economy entered a recession due to the impact of the COVID-19 pandemic, coupled with debt relief measures and loan moratoriums, which prevented a significant reduction in debt levels. This exacerbated the already fragile situation of household debt, with the household debt-to-GDP ratio rising to 80.1% in Q1 2020, indicating that households are struggling with declining incomes faster than the slowdown in borrowing.


"Gen Y–Gen X" Lead in Debt Creation

Data from the National Credit Bureau reveals that the group with the highest debt creation is Gen Y, which had a total debt of 4 trillion baht by the end of Q1 2020, with non-performing loans (NPL) amounting to 270 billion baht. Following them is Gen X, with a debt of 3.7 trillion baht and NPLs at 280 billion baht. The Baby Boomers have a total debt of 1.2 trillion baht with 84 billion baht in bad debt, while Gen Z has a total debt of 25 billion baht, with 1.2 billion baht classified as bad debt, primarily concentrated in car loans and non-automotive hire purchase loans.

Mr. Surapol Opassethi, Managing Director of the Credit Bureau, stated that in Q1, there were approximately 840,000 new personal loan accounts, with around 50% belonging to Gen Y. Among those with payment issues, defined as being overdue from 31 to over 90 days, Gen Y had the highest number, with bad debt in this group accelerating significantly to 1.6 million accounts, representing over 100 billion baht in problematic debt. Another group experiencing a continuous rise in bad debt is Gen X, with over 1.1 million accounts and nearly 140 billion baht in overdue debt.

Regarding home loans, there were 80,000 new accounts approved in Q1, with 64% belonging to Gen Y. The concerning number of overdue accounts in this group is also rising, with Gen Y having 110,000 accounts and 140 billion baht in overdue debt, while Gen X has nearly 120,000 accounts with over 130 billion baht in overdue debt.

A particular group to watch closely is Gen X debtors aged 38-54, as they tend to be consumer-oriented and often accumulate debt across various loans while establishing stable families. When faced with income shocks or job loss, their financial burden and debt repayment obligations become extremely high.

...Although this group has undergone some debt restructuring recently, there are still concerns about how they will generate income to repay their debts, especially in light of the impacts of COVID-19, even if some still have jobs or businesses to support them.

source : smartsme