Fitch Affirms Thailand at ‘BBB+’ with Stable Outlook

Fitch Ratings affirmed Thailand’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB+’ with a Stable Outlook, stating that Thailand has strong external, structural constraints as the ratings are underpinned by the country’s sustained external finance strengths and strong macroeconomic policy framework.

Fitch forecast the general government deficit will gradually narrow to 5.3% of GDP in the fiscal year ending-September 2022 (FY22). A narrower fiscal deficit reflects stronger revenue collection and a measured unwinding of pandemic-related economic relief measures.

Fitch forecast gross general government debt (GGGD) to rise to 55.4% of GDP by FYE22 (FYE21: 53.8%), broadly in line with the ‘BBB’ median (55.9%). The rating company expected the ratio to rise to 56.6% by FYE26, about 21pp above its pre-pandemic level. Fitch viewed risks to GGGD/GDP as tilted to the upside given plans for only gradual consolidation, particularly if the recovery is more prolonged, but the risks are mitigated by the government’s record of fiscal prudence, deep domestic capital markets, and a public debt stock mainly funded in baht.

GDP growth was expected to accelerate to 3.2% in 2022 (BBB median: 3.4%), up from 1.5% in 2021, bolstered by improved domestic consumption, still-supportive policy settings, and a mild recovery in inbound tourism. Thailand has relaxed domestic containment measures and fully reopened its borders to international travellers.

The economic growth should continue in 2023 by 4.5% (BBB median: 4.0%), underpinned by a continued recovery in domestic demand and a faster resumption of inbound tourism. Fitch’s baseline expects tourist arrivals will increase to 22 million in 2023, or 55% of its pre-pandemic level, from 6.5 million in 2022. The rating company envisaged that a full resumption of tourism inflows to pre-pandemic levels will take a few years, particularly given the slow revival of arrivals from China.

Fitch noted that Thailand has robust external finances, which will be its core strength. It projected foreign-currency reserves at USD232 billion by end-2022, sufficient to cover 7.8 months of current external payment in 2022, in excess of the ‘BBB’ median of 5.6 months.

Fitch forecast the current account deficit will narrow to 1.8% of GDP in 2022 from an estimated 2.1% in 2021, which reflects the modest recovery in tourism receipts offsetting higher energy import and freight payments. The rating company expected current account will return to a surplus of 1.0% in 2023 and widen further to 2.8% in 2024, as the tourism recovery gains momentum.


In addition, Fitch still paid close attention to pressure from rising inflation, elevated household debt, structural headwinds and political uncertainty that could underpin the government’s operations and economic growth in the mid-term.