Thailand Faces a Worsening Debt Crisis: NPLs Reach Larger Firms as Lending Slump Extends for a Third Year
Kasikorn Research cautions that contagion risk is rising as overdue loans approach 3%; Real Estate, Hospitality, and Manufacturing are flagged as the sectors with the highest default risk amid a cooling economy.
The Thai financial system confronts a serious test as Non-Performing Loans (NPLs) rise, signaling growing debt vulnerability across credit segments. This assessment from the Kasikorn Research Centre (KResearch) paints a worrying picture: the NPL ratio is nearing the critical 3% threshold, with projections around 2.8% to 2.85% for 2025. More alarmingly, the problem appears to be spreading from small and medium-sized enterprises (SMEs) to mid-sized and large corporations, which represents a notable shift in risk dynamics.
The sectors identified as having the strongest default risk include Real Estate, Hotel/Tourism, and Manufacturing.
Credit Tightening and Household Strain
Underlying the fragility is a forecast that total credit in Thailand will shrink for a third straight year.
Thanyalak Watcharachaisurapol, deputy managing director of KResearch, described this trajectory as “highly worrying,” anticipating a contraction of -2.3% for 2025 and a further -3% in 2026.
Retail credit—especially for big-ticket purchases such as homes and vehicles—has borne the brunt, squeezed by weaker consumer purchasing power and high household debt, which remains above 80% of GDP.
Retail credit is expected to decline sharply by around -12% this year. Although demand for household borrowing remains relatively strong, the overall contraction reflects a technical barrier to new lending due to reduced borrowing capacity among households.
In short, Thailand’s credit environment is tightening at multiple levels, signaling sustained pressure on borrowers and lenders alike. This raises questions about how long the downturn can persist and what policy or market remedies might restore balance.
Would you agree that the risks are concentrated more in certain sectors, or do you see broader vulnerabilities across the economy? And what steps should policymakers and financial institutions take first to avert a sharper downturn?
