Moody's Adjusts Thailand's Outlook: A Warning Sign the Economy Cannot Ignore

Credit rating agency flags concerns over rising debt and weakening fiscal strength

 

The downgrade of Thailand's economic outlook from stable to negative for the first time in nearly 17 years is a matter that cannot be overlooked, especially given the significantly reduced fiscal space.

 

Last week, unwelcome news impacting the Thai economy undoubtedly revolved around Moody's Ratings, formerly known as Moody's Investors Service, one of the world's oldest and most influential credit rating agencies.

 

The agency announced a downgrade of the "outlook" on Thailand's credit rating from "Stable" to "Negative." This marks the first time in nearly 17 years that the outlook has been lowered to "Negative."

 

Although this adjustment does not yet constitute a downgrade of Thailand's credit rating itself, the shift in outlook to negative serves as an economic warning that Thailand cannot afford to disregard. This is particularly true as Moody's explicitly stated that the change in outlook stems from a significant concern:


"Thailand faces a risk that its economic and fiscal strength will weaken."
 

Data from Kasikorn Research Center (KResearch) indicates that while Thailand has experienced negative credit rating outlook adjustments before, this instance differs from previous ones because past crises occurred when Thailand's public debt-to-GDP ratio was still relatively low.

 

The Thai government's economic stimulus measures in 2008-2009 led to a significant increase in the fiscal deficit. However, Thailand's public debt only rose from 35.0% of GDP in September 2008 to 39.3% of GDP in October 2010, an increase of just 4.3%.

 

In contrast, the latest data from the Public Debt Management Office (PDMO) shows that Thailand's public debt currently stands at 64.21% of GDP, a significantly higher level than before and rapidly approaching the debt ceiling of 70%.

 

Therefore, Moody's downgrade of our outlook is not solely due to an impending crisis stemming from reciprocal tariffs imposed by US President Donald Trump, as the government might suggest.

 

Instead, what they are highlighting is that Thailand is entering a new potential crisis with a "fiscal situation" that is not as robust as it was in the past.
  



 

The higher public debt leaves us with very little "fiscal space" to absorb a new crisis compared to previous times, a problem that individuals within the government are still not being entirely truthful about.

 

Therefore, instead of criticizing the credit rating agency for being too early or too late in their rating or outlook assessment of our economy, the government should heed the weaknesses in the Thai economy that Moody's has warned about, acknowledging the economic vulnerabilities and risks. They should then work to improve and resolve these issues, developing a plan to strengthen the economic structure.

 

This includes refraining from short-term populist policies like cash handouts and instead focusing on making the Thai economy grow and be competitive in the long term.

 

If this can be achieved, the possibility of Thailand's outlook being revised back to "Stable" and "Positive" in the future remains within reach.

(2025/05/05-00:00)