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Politics won’t hurt Thai fiscal and external strength, says Moody’s

Jun 13. 2019
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By THE NATION

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Moody's on Thursday predicted that Thailand will sustain fiscal and external strength regardless of political developments and despite structural challenges are persisting.

In its just-released FAQ on the government of Thailand (which it rates as Baa1 stable) Moody’s Investors Service analyses the outlook for policy, growth and structural reforms, against the backdrop of global trade tensions.

Moody's report also examines the impact of Thailand’s recent elections, and predicted policy continuity for the country’s 20-year national strategy, including investment in the flagship Eastern Economic Corridor. However, opposition to the ruling coalition’s slim majority in the lower house of parliament could delay the implementation of certain policies.

On the issue of how Thailand’s fiscal and external position will evolve, Moody’s concluded the Kingdom will likely sustain its strong fiscal position regardless of political developments, because of the country’s track record of adhering to fiscal rules, a factor that also supports Moody’s assessment of very high policy effectiveness.

Ongoing inflation within target and financial stability are factors that underscore the country’s monetary policy effectiveness, and persistent balance-of-payments surpluses will continue to bolster foreign exchange reserves and contribute to low external vulnerability risk, said the report.

However, absent significantly higher migration, the ageing of Thailand’s society will weigh significantly on growth potential. Moreover, while data indicate that Thailand’s education standards are higher than the average for countries with similar incomes, they remain lower than some rating peers and Asian neighbours. In the absence of ongoing policy reform, this situation will exacerbate demographic and skills constraints, and weigh on economic competitiveness.

As for the impact of the US-China trade dispute on Thailand’s economy, Moody’s said that while exports to China are declining, Thailand’s exposure to China is more moderate than for other Asia Pacific economies.

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