Thailand’s Household Debt and the Financial Literacy Trap: A Public Policy Analysis for Economic Sustainability

Abstract

                   This article aims to analyze Thailand’s household debt crisis within a public policy framework, with a particular focus on the role of the “financial literacy trap” as a structural mechanism linking household financial behavior to macroeconomic stability. The study employs a systematic literature synthesis based on the PRISMA 2020 guidelines, with quality appraisal conducted using the Critical Appraisal Skills Programme (CASP). The analysis draws upon empirical studies, international policy reports, and institutional publications over the past decade.                    The findings indicate that Thailand’s household debt crisis is not solely driven by economic factors but is the result of systemic interactions among (1) present-biased financial behavior, (2) financial knowledge deficits, and (3) a predominantly reactive policy structure that emphasizes short-term debt relief rather than long-term prevention. This issue is further intensified by the rapid expansion of digital lending and financial technologies (FinTech), which increase access to credit without a corresponding improvement in financial management capacity.                    The key contribution of this study is the development of the “Financial Immunity Policy Framework,” which integrates financial knowledge capital with policy capital within a financial learning ecosystem. The framework is driven by three core mechanisms: lifelong financial learning, behavioral policy design, and policy learning mechanisms. This integrated approach has the potential to reduce new debt incidence and disrupt persistent debt cycles by reshaping financial behavior and systemic incentives.                    Policy recommendations emphasize a paradigm shift from reactive to preventive policy, including the development of a national financial literacy strategy, the establishment of community-based financial learning centers, and the application of behavioral tools in credit regulation. While this study does not claim direct empirical validation, it proposes a policy framework that can be further simulated and tested in future research to enhance the long-term financial stability of Thai households.