Singapore, April 11, 2024 — Moody’s Ratings has today affirmed the Government of Thailand’s Baa1 issuer and local currency senior unsecured ratings and maintained the stable outlook. Moody’s Ratings has also affirmed Thailand’s foreign currency commercial paper rating at P-2.
Key Takeaways
- Moody’s Ratings affirmed Thailand’s Baa1 rating with a stable outlook, citing expectations of stabilizing government debt and strong debt affordability.
- Thailand’s economic recovery is expected to continue, supported by growth in the tourism sector, goods exports, and public investment.
- Political risks, rapid population ageing, and sluggish investments continue to constrain Thailand’s rating, with balanced risks to its credit profile.
- The country’s local and foreign currency country ceilings remain unchanged at Aa3 and A1, respectively, with considerations for external balances, effective institutions, and potential capital controls.
The affirmation of Thailand’s Baa1 rating reflects Moody’s Ratings expectation that the government will stabilize its debt burden over the medium term, at levels that are higher than pre-pandemic but comparable to similarly rated peers.
The country’s deep domestic capital markets which allow the government to borrow at low costs and a favourable debt structure support debt affordability. Moreover, Thailand’s large and moderately diverse economy, as well as its strong macroeconomic policy effectiveness also support its rating at Baa1. The rating also takes into account material downward pressure on the economy’s growth potential from rapid population ageing, while investments have been sluggish limiting potential for stronger productivity growth over the near to medium term. Polarisation and its associated political risks continue to constrain the rating by constraining progress on significant reforms and fueling uncertainty which hampers investment.
Stable outlook indicates balanced risks to Thailand’s credit profile
Thailand’s economic strength may benefit from productivity gains, including through the ramp-up of the Eastern Economic Corridor to a greater extent than Moody’s Ratings currently expects. Conversely, downside risks stem from potential material delays to fiscal consolidation, leading to continued increases in the government debt burden over the medium term. Thailand’s economic and fiscal strength may also weaken beyond Moody’s Ratings expectations due to more significant erosion of the economy’s potential, and/or greater fiscal costs of population ageing than Moody’s Ratings assumes.
Thailand’s local and foreign currency country ceilings remain unchanged at Aa3 and A1, respectively. The four-notch 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. The one notch gap between the foreign currency ceiling and the local currency ceiling takes into account Thailand’s history of imposing capital controls, although its low external indebtedness and high policy effectiveness reduce the risks of potential transfer and convertibility restrictions in very low-probability scenarios of the government seeing a need to impose them.
