Singapore, April 07, 2022 — Moody’s Investors Service (“Moody’s”) today affirmed the Thai government’s Baa1 ratings for the issuer and local currency unsecured securities and maintained the outlook at stable. Moody’s also affirmed Thailand’s foreign currency commercial paper rating at P-2.
The affirmation of Baa1 ratings reflects Moody’s expectation that Thailand will continue to demonstrate economic resilience to future shocks, underpinned by its large and diversified economy and strong macroeconomic policy effectiveness.
The rating also takes into account the significant downward pressure on the economy’s growth potential due to the rapid aging of the population and the likely long-term economic scars of the pandemic.
Thailand’s fiscal metrics will remain stronger than most Baa-rated peers
While Moody’s expects Thailand’s public debt to rise and remain well above pre-pandemic norms, leaving the government with weakened fiscal strength for some time to come, Thailand’s fiscal measures will still be stronger than most. Baa-rated peers. In addition, Moody’s believes the government is likely to accelerate its pace of fiscal consolidation over the next two to three years once the economic recovery takes hold.
Balanced Risks for Thailand’s Credit Profile
The stable outlook indicates balanced risks for Thailand’s credit profile. Thailand’s economic strength could benefit from productivity gains, including from the ramping up of the Eastern Economic Corridor, to a greater extent than Moody’s currently expects.
On the other hand, the economic and social costs of aging and Thailand’s ability to absorb them have yet to be tested. Meanwhile, the authorities’ track record of effective macroeconomic policies, including prudent fiscal policies, despite the noise in the political landscape, is contributing to a stable outlook.
Thailand’s national limits in local and foreign currencies remain unchanged at Aa3 and A1, respectively. The four-notch gap between the local currency ceiling and the 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 difference between the foreign currency cap and the local currency cap reflects Thailand’s history of imposing capital controls, although its low external indebtedness and high political efficiency reduce the risks of potential transfer and convertibility restrictions in very low probability scenarios of the government seeing the need to impose them.