Banks should rethink role, executive says

Ttb chief urges regulators, financial institutions and borrowers to adopt a new perspective, writes Somruedi Banchongduang

Thailand’s banking industry should rethink its role in an economy facing mounting structural challenges, says Piti Tantakasem, chief executive of TMBThanachart Bank (ttb), arguing banks should focus less on loan growth and more on improving the financial health of borrowers and savers.

Lost Decades

Reflecting on Thailand’s economic performance over the past two decades, Mr Piti said the country’s economy has steadily weakened.

According to the National Economic and Social Development Council (NESDC), Thai GDP growth reached a high of 7.8% in 2010, then plunged to 0.1% in 2011 due to severe flooding.

From 2013 to 2026, annual GDP growth has mostly remained less than 3%, with exceptions in 2016, 2017 and 2018 when growth tallied 3.2%, 3.9% and 4.1%, respectively.

The NESDC forecast GDP growth this year of 1.5-2.5%, supported by expansion in private consumption and investment, increased government spending and higher exports.

The forecast includes the impact of the 400-billion-baht emergency loan decree, with 170-200 billion expected to be disbursed this fiscal year, with the remainder spent in 2027.

The profitability of the banking sector has also deteriorated in line with broader economic conditions, he says. This is reflected in banks’ return on equity (ROE), which historically remained in the double digits, with some institutions recording ROE of 16-18%.

Today many banks generate only single-digit returns.

“Given this deterioration, we can say Thailand has experienced ‘lost decades’. This fragility stems largely from a defensive mindset adopted by both the public and private sectors,” he said.

Over the past two decades, Thailand has pursued economic policies centred on caution and preservation rather than proactive expansion. As a result, the country’s competitiveness has gradually weakened, particularly as regional peers have embraced more aggressive growth strategies.

China has pursued rapid expansion in future industries, particularly electric vehicles (EVs) and advanced technologies, committing substantial resources to becoming a global leader.

Vietnam also advanced through comprehensive public sector reforms, serious anti-corruption efforts and an open-door policy towards foreign direct investment (FDI) aligned with emerging industrial trends.

Meanwhile, Singapore has reinvented itself through structural transformation, positioning the country as a global wealth-management hub while attracting top-tier talent from around the world.

“Thailand’s preference for playing defence resembles a football team that focuses solely on protecting its goal without creating opportunities to attack. Eventually, such a team can do little more than wait for the inevitable goal against it,” said Mr Piti.

Structural Challenges

He said the consequences of the country’s prolonged defensive posture have manifested across three critical areas of the economy: rising household debt, the fragility of small and medium-sized enterprises (SMEs) and a weakening labour market. Together, these factors have contributed to Thailand’s broader structural challenges.

As household incomes have failed to keep pace with the rising cost of living, many families have increasingly relied on borrowing to maintain their standard of living. Consequently, Thailand’s household debt has risen to an alarmingly high level of around 87% of GDP.

“Meanwhile, Thai SMEs are facing a sandwich effect, as they are being squeezed by both large domestic corporations and cross-border e-commerce platforms,” Mr Piti said.

On one hand, large domestic companies have expanded into lower-end market segments as growth opportunities in premium markets become saturated. On the other hand, cross-border e-commerce platforms and an influx of low-cost Chinese imports have eroded the competitiveness of local retailers and small manufacturers, leaving many struggling to survive.

Since SMEs are the country’s primary source of employment, their difficulties have significant implications for the labour market. At the same time, the adoption of artificial intelligence (AI) is enabling larger corporations to reduce headcount and automate tasks.

The combined effect is weaker employment growth, stagnant incomes and a worsening concentration of wealth, contributing to widening economic inequality.

Reinventing Thailand

Thailand is confronting a “perfect storm” of policy uncertainty, demographic ageing and intensifying competition from China, which has emerged as a powerful rival across virtually every sector of the economy.

“The only viable path forward is to redefine the country’s economic direction through what can be called ‘Reinventing Thailand’ by modernising and strengthening our existing areas of competitive advantage,” Mr Piti said.

As part of this strategy, he suggested policymakers and stakeholders focus on five high-potential industries: automotive, food and agriculture, healthcare and medical services, tourism, and retail and commerce.

1. Automotive: Thailand should gradually transition towards the EV segment while repositioning itself as a production and conversion hub for commercial vehicles. This includes converting diesel trucks, public buses and other heavy-duty vehicles into electric or hybrid systems.

The country can also leverage its expertise in automotive parts and electronics to support the domestic defence industry, producing strategic equipment and technologies locally rather than relying heavily on imports.

2. Food and Agriculture: Thailand must pursue structural reform within its agricultural sector by moving beyond conventional food crops towards the development of energy crops and alternative feedstocks. Such a transition would help reduce dependence on imported energy while creating new sources of value-added growth for the agricultural economy.

3. Healthcare and Medical Services: Although Thailand has established itself as a regional medical hub that attracts large numbers of international patients, the country still imports around 70% of its medicines and medical supplies.

As Thailand transitions into an ageing society, government policy should encourage the development of domestic pharmaceutical, medical device and healthcare manufacturing industries to enhance both economic resilience and healthcare security.

4. Tourism: Thailand should rethink its tourism strategy by reducing its reliance on foreign visitors alone. Greater emphasis should be placed on developing products and services tailored to affluent Thai retirees and the elderly.

Such an approach could stimulate weekday travel, distribute tourism income more evenly across secondary cities and local communities, and create a more sustainable tourism system that is less vulnerable to external shocks.

5. Retail and Commerce: Thailand must recognise many retail channels and digital commerce platforms are increasingly dominated by foreign players, particularly Chinese e-commerce operators.

When market access and distribution channels are controlled by foreign entities, a significant share of economic profits is ultimately extracted from the domestic economy.

“The government should adopt clear and effective policies to strengthen local retail ecosystems and create a more level playing field for Thai SMEs, ensuring that domestic businesses can compete and thrive in the digital age,” he said.

Financial Reboot

Mr Piti suggested the banking industry should adopt a more proactive approach and redefine success around creating sustainable value for all stakeholders, including customers, employees, shareholders and society as a whole.

“Banks should measure success by the returns they generate for savers and by improvements in borrowers’ credit scores. Through this approach, banks can help improve the financial well-being of households, businesses and society overall,” he said.

For savers, banks can help build long-term wealth through wealth-management services and investment solutions that support retirement planning in an ageing society.

For borrowers, banks should focus on improving financial discipline and transparency, including through risk-based pricing. Such measures would strengthen borrowers’ financial health and improve their access to funding on reasonable terms.

“Amid a broad-based economic slowdown, loan growth is not the answer. Regulators, financial institutions and borrowers alike need to adopt a new perspective,” he said.

Mr Piti compared the economy to a human body and banks to the heart, whose role is to pump blood throughout the system. When the body is in a coma, demanding that the heart beat faster is not a cure — it may cause further damage.

He said the real solution is to nurse the body back to health. Only when the broader economy recovers can the heart sustainably regain its strength.