COVID-19 had a direct impact on consumer credit in Thailand during 2020 as the economic pressures that emerged in the wake of the pandemic led to many banks and other lenders becoming more circumspect in terms of their willingness to lend money. This was mainly due to the perceived higher risk of non-performing loans among the country’s lenders as the Thai population faced widespread economic uncertainty and in many cases diminished incomes due to the COVID-19 situation.
Although consumer credit generally came under severe pressure due to the COVID-19 situation during 2020, it was auto lending that bore the brunt of the declines seen in gross lending and outstanding balance. This is mainly because buying a new car is often seen as a luxury purchase, while the rapid depreciation that new current in particular are subject to also means that they are widely seen as a bad investment.
Faced with a bleak economic outlook for 2020 due to the COVID-19 pandemic, the Thai government sought to support consumers during the post-COVID-19 economic downturn by reducing the interest rates on personal loans and housing loans/mortgages in an effort to make borrowing more affordable to provide impetus for the flagging national economy. In addition, the Bank of Thailand sought to encourage borrowing via card lending by forcing the country’s credit card companies and banks to reduce their maximum interest rate from 18% to 12% during 2020.
While auto lending bore the brunt of the drop in demand for consumer credit due to the COVID-19 pandemic during 2020, the category of consumer credit that is set to be most negatively affected by the COVID-19 situation during 2021 is home lending. The unemployment rate is expected to continue increasing, not least due to the drop-off in demand for labour in the hospitality and tourism industries due to the impact of social distancing on demand for consumer foodservice and the closure of Thailand’s borders to international travellers.
2021 is expected to see an increase in the rate at which Thai borrowers pay off their smaller consumer loans. This is likely to be due to the recovery of the national economy, which can be expected to emerge tentatively at first, resulting in borrowers prioritising smaller debts to repay, rather than higher-value loans.
As mentioned above, gross lending and outstanding balance for big-ticket items is not expected to rebound to pre-COVID-19 levels before 2023. It is anticipated that a COVID-19 vaccine will have been launched by this time and that foreign tourists will thus be able to begin travelling to Thailand once again.
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Understand the latest market trends and future growth opportunities for the Consumer Credit industry in Thailand with research from Euromonitor International's team of in-country analysts – experts by industry and geographic specialisation.
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This report originates from Passport, our Consumer Credit research and analysis database.
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