Bangkok (VNA) - The Bank of Thailand (BOT) expects loan contraction in the banking industry to continue in the third quarter of this year, driven by ongoing debt deleveraging.
In the second quarter of 2025, total outstanding loans in the banking sector contracted by 0.9% year-on-year, following a 1.3% decline in the previous quarter, according to Suwannee Jatsadasak, the central bank's assistant governor for the supervision group.
According to the central bank's data, the banking sector has posted negative loan growth for four consecutive quarters.
The contraction began in the third quarter of 2024 with a 2% decline, followed by a 0.4% drop in the fourth quarter.
Suwannee said that although the pace of loan contraction in the second quarter was slower than in the past three quarters, the BOT does not expect loans to turn positive in the third quarter due to continued debt deleveraging.
Meanwhile, small and medium-sized enterprises (SMEs) continue to bear the brunt of tightened credit conditions, as banks maintain cautious lending practices and focus primarily on existing clients with strong repayment records and sufficient collateral.
This approach has made it increasingly difficult for new businesses to secure financing, contributing to a rise in non-performing loans (NPLs) in the corporate sector, which climbed to 2.91% in Q2.
According to the BOT's report, a notable shift has also emerged in consumer behavior. Households earning more than 50,000 THB (around 1,500 USD) per month have become more cautious in their spending, reflected in a 1.9% decline in credit card loans, primarily among higher-income groups./.
