Singapore, April 07, 2022 — Moody’s Investors Service (“Moody’s”) has today affirmed the Government of Thailand’s Baa1 issuer and local currency senior unsecured ratings and maintained the outlook at stable. Moody’s has also affirmed Thailand’s foreign currency commercial paper rating at P-2.

The affirmation of the Baa1 ratings reflects Moody’s expectations that Thailand will continue to display economic resiliency to future shocks, underpinned by its large and diverse economy and strong macroeconomic policy effectiveness.

The rating also takes into account material downward pressure on the economy’s growth potential from rapid population ageing and likely long-term economic scarring from the pandemic.

Thailand’s fiscal metrics to remain stronger than most Baa-rated peers

While Moody’s expects Thailand’s government debt to increase and remain markedly higher than pre-pandemic norms, leaving the government with weakened fiscal strength for some time, Thailand’s fiscal metrics will still be stronger than most Baa-rated peers. Further, Moody’s assesses it likely that the government will quicken its pace of fiscal consolidation in the next two to three years once the economic recovery takes hold.

Balanced risks to Thailand’s credit profile

The 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 currently expects.

By contrast, the economic and social costs of ageing and Thailand’s capacity to absorb them have yet to be tested. Meanwhile, the authorities’ track record of effective macroeconomic policies, including prudent fiscal policies, despite noise in the political landscape, contributes to the stable outlook.

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.

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