BoT sounds alarm on fragile labour market

The Bank of Thailand has raised concerns over growing fragility in the country's labour market, as rising unemployment threatens to weigh on domestic consumption.

Speaking at a press conference following last week's Monetary Policy Committee (MPC) meeting, Don Nakornthab, the MPC secretary, said Thailand's unemployment rate hiked to 1.1% from a recent low of 0.8%, reflecting growing fragility in the labour market.

The number of insured workers under Section 33 of the Social Security Act who have lost their jobs and registered for unemployment benefits has recorded a steady uptick, although the latest data indicate a slight decline.

"The labour market warrants monitoring as employment conditions are directly linked to household consumption and debt repayment capacity," he said.

While Thailand's economic growth was supported by exports and investment, private consumption remains weaker than expected, according to the MPC.

Beyond the household debt overhang, growing labour market fragility is emerging as another factor weighing on domestic demand.

The central bank recently downgraded its estimate for the GDP contribution from the government's "Thais Help Thais Plus" co-payment scheme to 0.4 percentage points this year, from 0.5 percentage points previously.

The regulator also lowered its forecast for private consumption growth in 2026 to 2.3% from 2.6%.

"Excluding the stimulus measures, private consumption growth is projected to slow to 1.6% this year," said Mr Don.

The central bank predicts domestic consumption to weaken further in 2027, forecasting growth of just 1.7% following the expiration of the co-payment scheme this month.

The combination of weak consumption and growing employment uncertainty could complicate the economic recovery, particularly as households continue to face financial pressure, undermining their ability to repay debts, noted the MPC.

Boondhiva Cheewatragoongit, manager for economic and industry research at Tris Rating, said the co-payment stimulus would provide short-term support for Thailand's economic recovery, but a sustained improvement in household purchasing power remains a key challenge.

Cumulative spending under the programme reached roughly 162 billion baht, comprising 93 billion baht in government contributions and 69 billion baht from consumers, based on government data as of September.

The first phase of the stimulus, which ran from June to September, is estimated to have lifted GDP growth by 0.4 percentage points. The second phase, running from October to November, is expected to contribute a further 0.1 percentage points, according to Tris Rating.

Ms Boondhiva said the stimulus should be viewed as a bridge to economic recovery rather than a substitute for a sustainable improvement in household purchasing power. The longer-term priority should be to restore households' spending capacity while preserving fiscal flexibility, she noted.

Meanwhile, Thailand's high household debt continues to constrain private consumption despite lower interest rates. The household debt-to-GDP ratio declined to 85.2% in the second quarter of this year, from 86.7% at the end of last year, but remained high compared with regional peers. For 2025, Malaysia's household debt-to-GDP ratio was 84.7%, followed by Singapore at 51.6%, Cambodia 25.3%, Indonesia 15% and the Philippines 13.6%.