Household debt to limit bank growth

Key players aiming for credit expansion

- SOMRUEDI BANCHONGDUANG

Thailand's elevated household debt is set to remain a key constraint on banking sector expansion in 2026, even as major domestic banks continue to target positive loan growth to support economic momentum.

Kris Chantanotoke, chief executive of Siam Commercial Bank (SCB), said the Thai banking industry will continue to face challenges from sluggish economic growth amid persistently high household debt, which he described as a structural weakness in Thailand's economy.

In the second quarter of 2025, Thailand's household debt-to-GDP ratio was 86.8%, limiting borrowers' ability to access additional credit. This poses a direct risk to banking operations, particularly in an environment of slowing economic growth, he said.

Meanwhile, Thailand's economy faces headwinds from both external and domestic factors. SCB's Economic Intelligence Centre (EIC) forecasts GDP growth of 1.5% in 2026, in line with the Bank of Thailand's assessment.

"This pace reflects growth below potential and heightened economic fragility. As a result, 2026 will be another challenging year," Mr Kris said.

The 1.5% growth would be the Thai economy's weakest performance in three decades, excluding crisis years, down from an estimated 2% in 2025. External pressures include a global economic slowdown, trade tensions, and intensifying foreign competition.

Domestically, structural constraints such as household and business fragility, weak purchasing power, fiscal limitations, and political uncertainty continue to weigh on growth.

Beyond weak economic fundamentals, Mr Kris said a self-fulfilling prophecy is weighing on sentiment and could further undermine confidence among households and businesses.