The Impact of Household Debt on Stability and Thai Economic Growth

Abstract

The objectives of this study were to 1) study the general condition and trend of household debt in Thailand during 2011-2020. 2) study the impact of household debt on economic growth and non-performing loan (NPL) of financial institutions. For quantitative analysis, the variables consisted of gross domestic product, household debt, household consumption, policy interest rate, and non-performing loan by using unit root test, cointegration test, and causality test as tools of this study. Using the quarterly time series data during 2011-2020, the household debt to GDP rate has started to accelerate between 60-89 percent.

The results of this study showed that 1) Thai household debt was likely to increase steadily. As of Q4 2020, it was found that about one-third of all household debt was loan for real estate mostly for housing. However, when it was included other factors such as personal consumption, hire-purchase of cars / motorcycles, credit cards and education were included, all these would account for more than 40 percent of total household debt. This reflected that the Thai economy has relied heavily on consumption through leveraged debt. 2) For the Impact of household debt, it was found that household consumption played the important role in economic growth, household debt, and non-performing loan. As the higher household debt to GDP rate increased, household debt began to affect household consumption at a significant level of 0.05, economic growth and non-performing loan at a significant level of 0.10. Due to being the driving force of consumption, the household debt contributed to the benefit of economic expansion in the short term. But later on in the next period, consumption will decline due to higher debt burden and negatively affect economic growth while accelerate higher non-performing loan.