15 June 2024

Fitch credit rating agency has affirmed Thailand’s long-germ foreign-currency issuer default rating (IDR) at BBB+, with a stable outlook.

Fitch warns, however, that lingering political uncertainty may weigh on Thailand’s credit profile, but this may be partially alleviated in the near term after parliament selects the prime minister. If the formation of a new government drags on for several months, it will impact effective policymaking, but Fitch believes that such an outcome is unlikely to lead to major shifts in the government’s key economic development strategy.

Real GDP growth is forecast at 3.75% this year and 3.8% next, up from 3.6% last year, says Fitch, as it predicts that economic prospects will be bolstered by tourism recovery from key source markets, alongside robust private consumption as the labour market recovers steadily. Exports will, however, continue to face headwinds due to lowering in global demand.

Fitch forecasts tourist arrivals to increase to 29 million this year, from last year’s 11.2 million, thanks to China’s swift reopening of the country to allow its citizens to travel.

Fitch projects a general government deficit of 3.4% of GDP this fiscal year, down from 4.4% last fiscal year. The deficit reduction reflects stronger than budgeted tax revenues and the phasing out of massive spending on the fight to contain the COVID-19 pandemic. The deficit is expected to fall further to 3.2% of GDP in the 2024 fiscal year on solid revenue collection.

Government debt is forecast to rise to 55.9% of GDP by the 2025 fiscal year, equal to the median for BBB category peers.

Thailand’s headline inflation is forecast is to average 2.0%, compared to 6.1% in 2022 and within the Bank of Thailand’s 1.0 to 3% target band.

The household debt to GDP ratio fell to 90.6% in the first quarter of this year, from a peak of 95.5%, in the first quarter of 2021, but the ratio remains above that of most countries in the region.