Rising Household Debt: Implications for Economic Stability
Keywords:
Household debt, economic stability, economic growthAbstract
This study examines whether there is empirical ground to the conventional wisdom that the rising household debt Thailand experienced over the past few years has increased risks to macroeconomic stability. We find that while the recent debt surge does not raise short-term risk to the financial system, it has represented a key impediment for economic growth. We also establish the critical DSR threshold of 40%. Above this level, households in all occupations exhibit a significant increase in their predicted probability of having difficulty paying their debt. On the threats associated with future interest rate hikes, our micro-simulation model indicates that low-income households are likely to see disproportionate increase in DSR. The rate increases will also threaten households who are `almost’ financially vulnerable and the impacts on consumption growth will not be limited to the low-income groups.
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