Thailand's Fiscal Stability Under Threat, Government Report Finds
Debt-servicing costs could breach a key threshold by 2027, risking a credit rating downgrade, a government report warns
- A government report warns that the ratio of interest payments to revenue is on track to exceed 12% by 2027, which could trigger a downgrade to the country's credit rating.
- Thailand's public debt is projected to hit its legal ceiling of 70% of GDP sooner than expected, which would severely limit the government's ability to enact future economic measures.
- The report identifies low government revenue collection, stemming from a tax structure that relies heavily on consumption, as a key fiscal weakness requiring urgent reform.
Thailand is facing growing fiscal risks, with a key government body warning that the nation's ability to service its debt is weakening.
According to a report by the National Economic and Social Development Council (NESDC), the ratio of interest payments to government revenue is on track to exceed 12% by 2027—a level that could trigger a downgrade to Thailand's credit rating.
The NESDC's report, released as part of its economic outlook for Q2 2025, highlighted the importance of this metric for international credit rating agencies.
A downgrade to a non-investment grade could make borrowing more expensive for the country and potentially signal to investors that its economy is a riskier bet.
To address this mounting concern, the NESDC recommends that the government dedicate a larger portion of its budget to repaying the principal on its loans, particularly the significant debt accumulated during the COVID-19 pandemic.
This would not only improve the country's debt-servicing capacity but also create more fiscal space for future economic policies.
Thailand’s current credit rating is Baa1 with Moody's, which recently assigned a "negative outlook" due to economic uncertainty and falling tourist numbers.
However, S&P Global Ratings and Fitch Ratings have maintained their ratings at BBB+ with a "stable outlook," citing the country's strong tourism recovery and robust foreign exchange reserves.
Despite some positive indicators, the NESDC's report highlighted several key fiscal weaknesses.
The country's public debt is projected to hit the legal ceiling of 70% of GDP sooner than expected, which could severely limit the government's ability to implement future economic measures.
Additionally, the government's revenue collection remains low, standing at less than 16% of GDP. This is significantly below the average for OECD and Asia-Pacific countries, which are at 24.8% and 18.6%, respectively.
The report attributes this to a tax structure that relies more on consumption than on income or assets, leading to revenue growth that is consistently slower than economic growth.
The NESDC is urging the government to implement urgent reforms to increase the efficiency of revenue collection, restructure the tax system, and expand the tax base.
