THAILAND
INTERNATIONAL MONETARY FUND
15
3. The assets of the main NBFIs reached
61 percent of GDP in 2018 (up from 33
percent in 2007). The insurance sector is well-
capitalized, with a diversified asset allocation,
and has adjusted to the low-interest rate
environment by shifting away from endowment
products. However, profitability has been
weakening, reflecting rising costs and
competition. Asset allocation to equity is
relatively high for non-life at around 30 percent,
and investments in riskier assets have increased.
4. Thailand’s capital markets are largely
on par with regional peers (Figure 4). Equity
market capitalization reached 99 percent of GDP at end-2018. The domestic bond market is
dominated by government and central bank paper, and corporate bonds represent one quarter of
outstanding debt securities mostly investment-rated, baht-denominated and held by domestic retail
and institutional investors. Retail clients dominate the investor base for mutual funds. Roughly half
of the funds are fixed income, while the shares of equity and infrastructure funds have increased in
the last few years. Foreign investment funds account for about one-fifth of total asset under
management (AUM).
5. Financial vulnerabilities appear to be contained, but household indebtedness is
relatively high and there are weaknesses in some corporates and SMEs (Figure 5).
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The household debt to GDP ratio remains among the highest in the region, despite a
moderate decline in recent years (Figure 6). The significant pick-up through 2013 was driven
by personal loans and hire purchase (mainly autos), partly reflecting one-off factors (e.g., the
2011 floods and the first car tax rebate scheme). Housing prices have risen sharply in areas of
Bangkok, especially condominium prices backed by an increase in foreign purchases, thus
making the housing market vulnerable to volatility in external demand. The increase in the
broader housing market has been moderate, particularly when compared to regional peers.
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