Fitch Ratings has affirmed Thailand’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB+’ with a Stable Outlook.

The rating takes into account Thailand’s strong external finances and sound macroeconomic policy framework, but also considers weaker structural features and political uncertainty.

Key Takeaways

  • Fitch Ratings has affirmed Thailand’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB+’ with a Stable Outlook, balancing strong external finances and sound macroeconomic policy against weaker structural features and political uncertainty.
  • Fitch forecasts a strengthening of Thailand’s growth with real GDP growth projected at 3.7% in 2023 and 3.8% in 2024, driven by a broad-based tourism revival and robust private consumption.
  • Thailand’s resilient external position, strong tourism recovery, and ample foreign reserves provide a buffer against financial risks, while political uncertainty and high household debt remain challenges for the country’s credit profile.

Fitch forecasts a strengthening of Thailand’s GDP growth, driven by a broad-based tourism revival and robust private consumption. The tourism recovery outlook has improved, particularly due to China’s swift reopening.

However, political uncertainty remains a concern, and a more protracted political strife could impact social stability and disrupt budget disbursements. Fitch projects a mild fiscal consolidation and expects Thailand’s public-debt ratio to stabilize over the medium term.

Thailand’s external position is considered resilient, with a large net external creditor position and ample foreign reserves. The country’s household debt remains elevated, posing a financial-sector vulnerability.

Thailand has an ESG Relevance Score reflecting its political stability, rule of law, and control of corruption, but also highlighting persistent political volatility. The rating agency has assigned Thailand a score equivalent to a rating of ‘BBB’ on the Long-Term Foreign-Currency IDR scale, with a positive adjustment to offset temporary GDP volatility caused by the Covid-19 shock.

Negative rating actions could result from inability to stabilize the general government debt ratio or heightened political disruption, while positive rating actions could be driven by an improvement in medium-term growth prospects and a decline in the general government debt-to-GDP ratio.

Key ratings drivers

External Strengths, Structural Constraints

Thailand’s ratings balance its strong external finances and sound macroeconomic policy framework against weaker structural features, such as lower per capita income and World Bank governance scores, compared with ‘BBB’ category peers. Lingering political uncertainty weighs on Thailand’s credit profile, but this may be partially alleviated in the near term after parliament agrees on a new prime minister. Demographic headwinds could exacerbate the challenges to the medium-term growth outlook and fiscal consolidation plans.

Growth to Strengthen

Fitch forecasts real GDP growth of 3.7% in 2023 and 3.8% in 2024 for Thailand, up from 2.6% in 2022. We expect economic prospects will be bolstered by an increasingly broad-based tourism revival from key source markets, alongside robust private consumption as the labour market recovers steadily amid policy settings that remain supportive. Merchandise exports will continue to face headwinds, given subdued global demand and the lagged effect of monetary tightening in advanced economies.

Strong Tourism Recovery

We expect international tourist arrivals to significantly increase to about 29 million in 2023, from 11.2 million in 2022, reaching nearly three-quarters of its pre-pandemic level. Thailand’s tourism recovery outlook has improved in light of China’s swift reopening. A stronger-than-expected tourism recovery poses a key upside risk to near-term growth prospects, while a more pronounced global economic slowdown and domestic political uncertainty form the major downside risks to the economy.

Political Uncertainty Could Continue

Thailand’s near-term economic and fiscal policy outlook is somewhat clouded by lingering political uncertainty after the 14 May election. A joint session of parliament will be convened on 13 July to choose the next prime minister, but when a new government will take office is far from certain. Effective policymaking may be constrained if the formation of the government drags on for several months. Still, we believe such an outcome is unlikely to lead to major shifts in the government’s key economic development strategy.

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