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People shop in a supermarket inside a department store in Bangkok.   © Reuters
FT Confidential Research

Thai households still suffer debt hangover

FTCR data show consumer debt will remain a drag on the economy; regulations will help

| Thailand
  • Household debt in Thailand continues to grow in real terms, despite a falling debt-to-GDP ratio.
  • FTCR's latest survey indicated that urban consumers ramped up borrowing in the past year, and will increase debt further in 2018.
  • A slowdown in borrowing will gradually boost sluggish private consumption growth in the long term - but only if the next government steers clear of debt-inducing populist economics.

Looking at the headline figures, Thai consumers would appear to have reined in their addiction to credit. Household debt peaked at 81.2 per cent of GDP at the end of 2015, and has now fallen for six consecutive quarters (see chart).

Household debt is a major reason for weak consumption in Thailand, which has dragged on the economy for over a decade, with spending shrinking from 55.8 per cent of GDP in 2006 to 50.7 per cent in 2016. In the second quarter, private consumption expanded just 3 per cent year on year, behind the overall GDP growth rate of 3.7 per cent. Thailand has the second-highest household debt-to-GDP ratio among the Asean nations, trailing only Malaysia (88.4 per cent).

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