Household debt in Thailand: Is it unsustainable? Part 2
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Household debt in Thailand: Is it unsustainable? Part 2

Just after BP blogged  “Household debt in Thailand: Is it unsustainable?” at the end of March, BP found a report from Credit Suisse First Boston. Below are some charts from Page 11:




The explanation on page 10:

With rising incomes, high employment, high savings and low leverage, Thai households are well positioned to spend more.
(1) High savings rate. Thai households have become bigger savers over the last decade by saving nearly 10% of disposable income, and have now amassed savings in excess of Bt200,000 per household over the past 10 years. Interestingly, during times of instability, Thai households become more conservative by increasing savings rates to nearly 12% as in 2007 and 2008 (Figure 16).

(2) Strong real wage growth. We discussed the outlook for nominal wage growth above, but when coupled with less than 4% inflation, annual real wage growth should come in at 7-10% over the next couple of years.

(3) Low household leverage. Thai households have a debt-to-personal income ratio of less than 0.6x (Figure 17), and total debt servicing costs are only slightly over 1% of income. Household balance sheets are under levered and rising leverage will be a catalyst for the housing market. Total mortgage lending has grown 14% annually from 2004, and we expect at least the same level of growth for the next three years. Simply put, Thai  households are not stretched, accumulated savings more than cover total outstanding debt and the balance sheet can be utilised for higher spending.

Then from the IMF:


Source: IMF

BP: This is not necessarily to say that people should take on more debt, but that current household debt is not unsustainable.

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