Thailand’s Inequality Eases, but Rising Household Debt Threatens a Fragile Recovery

Thailand avoided a sharp rise in inequality during COVID-19 thanks to massive social assistance, but the poorest households were still forced into higher, often informal debt to survive the income shock. The IMF–NSO study warns that without reforms to expand equitable social protection, rising household debt could threaten Thailand’s long-term inclusive recovery

Thailand’s battle with inequality and household debt, both during and after the COVID-19 pandemic, takes center stage in a new study by the International Monetary Fund (IMF) and the Thailand National Statistical Office (NSO). Their joint research draws on three waves of Thailand’s Household Socio-Economic Survey to reveal how one of the nation's worst economic shocks unexpectedly coincided with a modest decline in income inequality. Yet beneath the surface, the pandemic amplified vulnerabilities among low-income households and increased their dependence on debt, exposing a fragile recovery architecture.

A Fierce Economic Shock Contained by Extraordinary State Support

When COVID-19 hit, Thailand’s tourism-dependent economy unraveled almost instantly. GDP collapsed by 12.2 percent in Q2 2020, unemployment soared, and supply-chain disruptions rippled across manufacturing and services. But despite the severity, household incomes did not fall as sharply as expected. Massive government intervention, THB 1.56 trillion, nearly 10 percent of GDP, pumped cash transfers and in-kind support into more than 80 percent of Thai households. This unprecedented aid prevented a surge in poverty and helped stabilize inequality. Still, the poorest families absorbed net income losses and often turned to informal lenders, revealing gaps in coverage and adequacy.

Inequality’s Hidden Drivers: Education, Demographics, and Digital Access

The study identifies the structural factors that shaped inequality during this period. Internet access emerged as a particularly potent equalizer, enabling remote work, online business, and broader connectivity. Households headed by employed or married individuals, or those in urban areas, experienced lower inequality pressures. Education, however, showed a striking nonlinear pattern: an increase in primary and secondary schooling reduced inequality, but growth in college-educated households increased it. This reflects Thailand’s regressive returns to higher education, where wealthier groups reap greater benefits from university-level credentials. At the same time, demographic shifts, fewer male-headed households and more with secondary or post-secondary education, helped nudge inequality downward between 2019 and 2023.

Debt Surges in the Shadows: How the Poor Bore the Heaviest Burden

Thailand entered the pandemic already weighed down by one of the world’s highest household-debt levels. By early 2021, debt had surged to 95.5 percent of GDP. After COVID-19, low-income households became significantly more likely to hold both formal and informal loans. Debt increased for agriculture, small business operations, and education, reflecting workers returning to farming, struggling micro-enterprises, and families financing studies amid income losses. Informal borrowing spiked among the poorest groups, exposing them to predatory interest rates. Surprisingly, while more low-income households borrowed, their debt-to-income ratios did not rise faster than those of wealthier groups, likely because poor households were credit-constrained and pushed toward smaller, riskier informal loans rather than larger formal credit.

Social protection influenced these dynamics sharply. Expanded access to social assistance reduced both the likelihood of borrowing and the amount borrowed, acting as a financial shock absorber. But greater access to social insurance had the opposite effect, increasing borrowing by boosting households’ perceived stability and creditworthiness. This divide reflects a core structural imbalance: social assistance reaches the poor; social insurance largely benefits formal, better-off workers.

A Landscape Still Marked by Structural Inequality, and a Call for Reform

Beyond the pandemic effects, the report highlights longstanding regional, sectoral, and labor-market divides. Bangkok’s GDP per capita is more than six times that of the Northeast. Households in poorer regions rely heavily on consumption and agriculture loans and carry disproportionately high debt burdens. Agriculture remains a low-wage trap employing nearly a third of the workforce but contributing less than 9 percent of GDP. More than half of Thai workers are in informal employment, lacking protections, earning lower wages, and facing limited mobility. Gender inequality has narrowed in aggregate but persists among similarly skilled workers and in leadership roles.

The IMF–NSO study concludes that while inequality fell slightly after COVID-19, Thailand cannot rely on crisis-era dynamics to sustain progress. Strengthening social assistance, improving targeting, expanding insurance to informal workers, and addressing regional and sectoral gaps are essential to making growth more inclusive. At the same time, rising household debt, especially informal debt among the poor, poses a long-term threat to financial stability. Without deeper reforms, the vulnerabilities exposed by the pandemic risk hardening into structural obstacles to equitable growth.