Kasikorn Research warns of contagion risk as overdue loans hit 3%; Real Estate, Hospitality, and Manufacturing flagged for high default risk amid economic slowdown.
The Thai financial sector is grappling with a severe challenge as Non-Performing Loans (NPLs) surge, reflecting a dangerous escalation in debt fragility across all segments, according to a stark assessment from the Kasikorn Research Centre (KResearch).
The report warns that the NPL ratio is now nearing the critical 3% level (projected at 2.8% to 2.85% for 2025), with the problem spreading from small and medium-sized enterprises (SMEs) to medium and large corporations—a highly concerning development.
Groups identified as having the highest risk of defaulting on loan repayments include the Real Estate, Hotel/Tourism, and Manufacturing sectors.
Credit Crunch and Household Strain
The underlying vulnerability is underscored by the projection that total credit in Thailand will contract for a third consecutive year.
Thanyalak Watcharachaisurapol, deputy managing director of KResearch, called this trajectory “highly worrying,” forecasting a contraction of -2.3% for 2025 and a further -3% in 2026.
Retail credit, particularly for high-value items like housing and automobiles, has been hit hardest, driven by consumers’ depleted purchasing power and high household debt, which remains above 80% of GDP.
Retail credit is expected to contract by a dramatic -12% this year.
While household borrowing demand remains high, the contraction reflects a technical inability to secure new loans due to reduced household borrowing capacity.