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Thai Household Debt and risks to the economy

In 2021, the housing market in the Bangkok Metropolitan Region (BMR) will remain flat or see only mild growth, premised on: (i) the ongoing spread of COVID-19 and the effects of this on economic recovery, and (ii) steadily rising household debt that is undercutting consumer purchasing power and encouraging lenders to be more careful about the release of new credit.

The market for agricultural machinery contracted in 2023 on a combination of the onset of El Niño and the resulting drop in farm yields, and high levels of household debt. However, conditions should improve over 2024 to 2026, and the market is expected to swing back to average annual growth of 3.0-4.0%

In 2021, housing sales in the 6 major provinces will likely remain flat or drop slightly from 2020 levels as COVID-19 continues to hurt the economy. In response to the prevailing weak business conditions, developers have been trying to run down existing stocks of unsold properties. Looking at 2022 and 2023, conditions should improve along with stronger economic growth, while government stimulus measures will help to lift consumer purchasing power. But there are still several headwinds weighing on the property market. Household debt would continue to trend up, which would reduce affordability and simultaneously lead to tighter credit conditions. In addition, demand for housing has been mostly absorbed in 2020, when developers had cut prices to run down inventories, reflected in the mild drop in house ownership transfers. Also, demand from foreigners will continue to be capped by restrictions on international travel.

Even though the Thai economy has started to recover from the COVID-19 crisis for some time, household spending in Thailand has been slow and remains sluggish.

Outlook for advanced economies diverging amid worsening geopolitical tensions; Thailand prepares stimulus measure and debt-relief program

The Thailand Industry Outlook report evaluates the attractiveness of selected Thai industries to complement the credit evaluation process for the bank’s clients over the next 3 years (2021-2023). The report considers a range of factors that would influence each industry over this period. These include the broad competitive environment (e.g. trends in trade and the global economy, structural changes occurring at global level, and economic outlook for Thailand), as well as sector-specific variables (e.g. industry structure, Thai industrial competitiveness, and ongoing regulatory changes). We look at the players’ ability to cope with uncertainties, generate revenues, and service debt.

Players can expect to see average annual growth in spending on credit cards that will run to 8.0-9.0% per year over 2024-2026. The market will be boosted by greater spending on domestic and international tourism, continuing growth in e-commerce sales and consumers’ increasing familiarity with the process of making online payments. Nevertheless, the market will also come under pressure from only slow growth in domestic consumer spending power and the declining ability of borrowers to make their debt repayments on schedule

Global: Protectionism, Risk Prevention, and Precarious Recovery

Through 2019, the housing market in the Bangkok Metropolitan Region (BMR) is expected to keep growth flat or slow down due to a high base effect in 2018. The market will also encounter headwinds in the form of: (i) the new, stricter regulations governing housing debt that determine loan limits on a loan-to-value ratio; (ii) the introduction of the Land and Building Tax Act, which will come into effect in 2020; and (iii) a weakening of the spending power of overseas (and especially Chinese) buyers caused by a softening of the world economy. These factors may then feed into higher operating costs, and a decline in both investor confidence and the willingness of buyers to purchase new properties. However, in 2020 and 2021, the market is expected to rebound on the effects of government spending on major infrastructure projects and on greater demand for accommodation from non-Thai buyers investing or working in Thailand.