The Scarring Effects of COVID-19 on Household Debt in Thailand

Abstract

“Is credit given to where credit is due?” This paper examines how economic exposure to COVID affected household credit behavior in Thailand using loan-level panel data from the National Credit Bureau, combined with remotely-sensed night-time light intensity as a proxy for local economic disruption. I find that more COVID-exposed postal codes experienced significantly worse repayment outcomes, with delinquency rising especially strongly for loans originated during the pandemic. At the same time, total outstanding debt often declined in more exposed areas. However, this decline does not appear to reflect healthier household balance sheets. Rather, it is more consistent with tighter effective access to credit, as more exposed borrowers became more likely to make loan inquiries, while also facing a higher probability that those inquiries did not result in new loans. Further product-level results show that these dynamics were not uniform across loan categories — unsecured products such as credit cards and personal loans exhibit clearer signs of repayment distress, while agricultural credit appears more shaped by policy intervention, with compositional shifts toward smaller-amount loans. In addition, borrowers who entered the pandemic with only unsecured debt appear to be systematically more vulnerable to COVID exposure. These findings suggest that COVID-19 affected household credit markets in Thailand through a combination of various channels, including worsening repayment capacity, tighter effective credit supply, and changes in the composition of lending, with effects that react to the end of government debt relief policy and persisting well beyond the initial COVID period. This paper advances the use of remotely-sensed variables in development economics to proxy economic shock at granular geographic scales and holds implications for financial health monitoring and targeted government policy.