Massive household debt could ignite Thai financial crisis

UOB says this should be monitored.

Singapore's United Overseas Bank noted that consumer leverage is building up in Thailand in housing, car loans and personal credit cards, and if banks are not careful, this could be at the root of a downturn in next year’s economic growth, warns Jimmy Koh, head of research and investor relations.

In the first quarter, Thailand's household debt jumped to US$123 billion or 77.5% of gross domestic product compared with US$42 billion or 28.8% during the 1997 crisis.

Koh believes the next crisis in Asia will be one of consumer overlap. Koh pointed out that an overleverage in corporate debt was the main cause of the 1997 Asian financial crisis; banking overleverage resulted in the 2008 US subprime crisis and skyrocketing public borrowing caused the 2012 European sovereign debt crisis.

And the problem is not only occurring in Thailand, as high property prices are the result of consumer leverage in China and Singapore, he said.

Regulatory policymakers across Asia are aware of this problem and are implementing measures to manage asset price inflation and consumer credit.

UOB expects Thailand’s economic growth to fall within a range of 3.8% to 4% this year, with second-half growth weak on the back of the global slowdown.