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Investing.com -- Moody’s Ratings has affirmed the Government of Thailand’s Baa1 issuer and local currency senior unsecured ratings, while changing the country’s economic outlook from stable to negative. The ratings agency has also confirmed Thailand’s foreign currency commercial paper rating at P-2.
The shift in outlook to negative from stable reflects the potential risks that Thailand’s economic and fiscal strength may further weaken. The recently announced US tariffs are expected to significantly impact global trade and global economic growth, which could negatively affect Thailand’s open economy. There is also considerable uncertainty about whether the US will enforce additional tariffs on Thailand and other countries after the 90-day pause.
The negative outlook also takes into account the slow economic recovery in Thailand post-pandemic and the risk of exacerbating the declining trend in the country’s potential growth. The downward pressures on Thailand’s growth could further weaken the government’s fiscal position, which has already been negatively impacted since the pandemic.
Despite the change in outlook, the affirmation of the Baa1 ratings reflects Thailand’s moderately strong institutions and governance which support sound monetary and fiscal policies. The ratings also consider Thailand’s moderately strong debt affordability, despite the sharp increase in government debt since the pandemic. This is supported by its deep domestic markets and the fact that its government debt is almost entirely denominated in local currency. Furthermore, Thailand maintains a strong external position, with ample foreign exchange reserves.
Thailand’s local and foreign currency country ceilings remain unchanged at Aa3 and A1, respectively. The gap between the local currency ceiling and sovereign rating reflects a balance between the country’s strong external balances and effective institutions, against the government’s relatively large footprint in the economy and moderate political risks.
Moody’s Ratings has lowered Thailand’s real GDP growth to about 2% for 2025, down from 2.9% forecast six months ago. This revised projection is subject to downward risks, amid a still-evolving situation and persistent uncertainty.
Thailand’s government debt burden rose by about 22 percentage points to about 56% of GDP in the fiscal year 2024 from the fiscal year 2019. The country’s sluggish recovery is already impeding fiscal and debt consolidation. The government’s medium-term fiscal framework (MTFF), published in December 2024, was already signaling a further delay in fiscal and debt consolidation compared to the MTFF published in May 2024.
Thailand’s CIS-3 credit impact score reflects the country’s demographic challenges, notably an ageing population, and environmental challenges relating to flooding and heat stress. These risks are mitigated by Thailand’s sustained track record of solid governance and institutional strength which has contributed to overall stability in macroeconomic growth and which supports the sovereign’s capacity to respond to demographic and environmental challenges.
Despite the negative outlook, an upgrade could occur if Thailand displays a stronger-than-expected resilience to shocks, such as persistently stronger growth outcomes compared to expectations, which would also contribute to better fiscal outcomes. However, the rating could be downgraded if Thailand’s economic strength were to be eroded further, due to persistently weak economic growth because of structural challenges or factors outside the government’s control such as a global tariffs shock.
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