Consumers seek advice about debt solutions at the Bank of Thailand’s Debt Clinic service at the Money Expo 2024.

This article may be read as a continuation of my previous piece, Year of the Debt. That article focused mainly on household debt, which has already risen beyond the ability of Thai consumers to repay.

This article broadens the scope to include government and business debt and shows, once again, that these debt levels are also beyond the capacity of the economy to sustain. Excessively high debt – across government, business and households – will make the much-invoked dream of economic restructuring impossible.

It is well known that Thailand’s GDP growth lags behind that of other Asean economies. Thailand’s GDP growth in 2025 is estimated at 2.2%, while Vietnam, Malaysia and Singapore recorded growth rates of 8.02%, 5.1% and 4.8% respectively. Worse still, the IMF projects Thailand’s growth rate will slow further to just 1.6% this year. This is a red-flag warning that calls for an immediate restructuring of the entire economy. Such restructuring is said to include the development of new S-curve industries, investment to upgrade and modernise existing factories, an overhaul of the education system, and the reskilling of workers.

All of this requires money – a lot of money. For a start, investment must rise from its current low level of around 20% of GDP to the developing-economy standard of about 30% of GDP. That additional investment translates into roughly 2 trillion baht a year. Over a five-year restructuring period, the total would reach 10 trillion baht. The question is obvious: where will this 10 trillion baht come from? No political party ahead of the next election has seriously addressed the issue, as if money can simply fall from the sky. One major party talks about using "science and technology" to overhaul the economy. My question is simple: are science and technology free, or do they have to be paid for?

Readers familiar with the legendary Bangkok Post column Nite Owl may recall a famous line: "No money, no honey." I have a line of my own: "No money, no restructuring."

Without massive funding, economic restructuring is impossible for two reasons. First, all concerned parties will be preoccupied with fixing existing debt and scrambling for cash just to keep their businesses alive. They will have neither the time nor the strength to build new S-curve industries while their existing operations are on the verge of foreclosure. Workers, meanwhile, will have little incentive to be reskilled if creditors are chasing them. I will not even raise the question of who would pay for reskilling costs or compensate workers while they are in training.

Second, S-curve industries are expensive. Where will the investment funds come from? It would be foolish to assume foreign investors will shoulder the entire burden. To build its semiconductor industry, the Vietnamese government committed to invest up to 30% – about US$400 million (12.4 billion baht) – in a new semiconductor plant. With that commitment, construction is under way and scheduled for completion in 2026, with the first "Made in Vietnam" chip expected in 2027.

Thailand also dreams of a "Made in Thailand" chip. However, we do not expect to see our first chip until around 2050. Timing aside – Thai people can surely wait – the more important question remains: where will the money to build such a plant come from?

Thailand is already burdened with too much existing debt, leaving little or no room to finance economic restructuring. The evidence is shown in the table, which compares Thailand’s debt outstanding as a percentage of GDP with world averages, divided between advanced and developing economies. It clearly shows that Thailand carries a much heavier debt burden than its developing-country peers. Even more striking, Thailand’s private-sector debt exceeds that of advanced economies, many of which have invested heavily in costly high-tech industries such as artificial intelligence.

With such debt levels, the Thai private sector – households, large corporations and SMEs alike – will naturally focus on keeping themselves afloat. For those who wonder why Thailand’s growth potential has fallen from 7% to 5% and now to around 2%, the answer lies in the table: there is no money left to upgrade factories and stay competitive. Given current debt levels, dreaming of new S-curve industries is a waste of time. Thailand’s domestic banking sector is effectively in a zombie state, making it unrealistic to expect financing from banks.

In 2025, based on data available up to November, Thai banks did not extend a single baht in net new loans; instead, they recalled 324.6 billion baht in existing loans. That is why I call them "Draculas" rather than zombies. Expecting them to provide multi-trillion-baht financing for new S-curve industries is simply detached from reality.

To restart Thailand, policymakers must begin by addressing the figures in the table – not by indulging in visions of S-curve industries, education reform or workforce empowerment.

The first step is to reduce private-sector debt from 183.7% of GDP to 122.7%, bringing it in line with the developing-country average. This implies a haircut of roughly 60% of GDP, or about 12 trillion baht. The government and the Bank of Thailand have no choice but to undertake this "impossible" task. It is a do-or-die solution. For comparison, private debt-to-GDP ratios among Asean peers stand at 128% in Vietnam, 117% in Malaysia, 50% in the Philippines and 40% in Indonesia. Let me repeat: do or die.

Thailand cannot move forward without first dealing with its debt problem.

I have intentionally left public debt largely aside. On the surface, Thailand appears to be doing fine, with public debt slightly below the developing-economy average and well below that of advanced economies. However, public debt is in fact Thailand’s most troubling liability. The issue is not the debt-to-GDP ratio, but the ability to finance that debt. The financing of Thailand’s public debt could trigger a financial crisis similar to that of 1997.

Here is a hint. Thailand’s economy is projected to grow by just 1.5% to 1.7% in 2026, equivalent to an additional 300–340 billion baht in income. Yet the government deficit for the 2025/26 fiscal year is set at 860 billion baht. How will this enormous gap be financed?

I will explain this in my next article. I will show beyond doubt that this financing gap will cause a liquidity crunch, leading to a financial crisis. I accurately foresaw the 1997 crisis using the same principles. I am confident history will repeat itself in 2026.

Chartchai Parasuk, PhD, is a freelance economist.