Personal debts in Thailand are a drag

We've written several times about weakness in the Thai economy and markets. Net equity fund flows are negative, partly hurt by political uncertainty. The property market remains sluggish.

The household debt burden is another factor; it remains the highest among ASEAN nations.

We can illustrate the drag this is having on the economy by charting the long-time correlation between the Thai central bank's figures on personal loans and motor vehicle registrations. As this measure of credit growth slowed – and, lately, has fallen into contraction, indicating consumers are having to reduce their debt burdens – big-ticket purchases like cars are being deferred.

As our second chart shows, the household debt-to-GDP ratio approached 100% during the pandemic – an all-time high. It remains near 90%, significantly outpacing No. 2 Singapore's 53.3%.

Our final two charts examine the "private sector" debt-service ratio, which encompasses both non-financial corporations and households. It's reached a 23-year high of 15.3%. Unsurprisingly, bad debts at the nation's banks are also on the rise.

Like most nations, Thailand increased interest rates in the wake of post-pandemic inflation, and that has helped worsen debt burdens – but given the economic weakness, it's notable that the central bank has held its key rate at 2.5%, substantially below ASEAN neighbors like Singapore and Malaysia.

In response to subdued consumer demand, the government has proposed a 500-billion-baht "digital wallet" stimulus policy. It would provide a one-time handout of THB 10,000 to 50 million citizens, earmarked for spending within local communities over a six-month period.

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