Fitch Ratings Puts Thailand on 'Negative' Outlook, Citing Political and Fiscal Risks
The credit rating agency maintains a 'BBB+' rating but warns of deteriorating fiscal health and political uncertainty following the removal of the prime minister
- Fitch Ratings has changed Thailand's credit outlook to 'Negative' from 'Stable', while maintaining its 'BBB+' rating, due to a combination of political instability and fiscal deterioration.
- The negative outlook is driven by fiscal risks, including a rise in public debt to 59.4% of GDP and projected budget deficits for 2025 and 2026.
- Political uncertainty is a key factor, with the recent removal of the Prime Minister and an upcoming snap election creating concerns about the continuity of national policy.
Global credit rating agency Fitch Ratings has revised its outlook on Thailand’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘Negative’ from ‘Stable’, citing a combination of political instability, fiscal deterioration and sluggish economic growth.
The country’s overall credit rating remains at ‘BBB+’.
According to Fitch, Thailand's public debt has risen steadily, now standing at 59.4% of GDP. This figure is close to the average for 'BBB' rated nations and marks a 25% increase since before the COVID-19 pandemic.
The agency highlighted political uncertainty as a key factor.
The recent removal of Prime Minister Paetongtarn Shinawatra has led to the need for a new government and a snap election expected within the next four months.
This has created concerns about the continuity of national policy and administration.
Fitch’s forecast for Thailand’s economy is a modest 2.2% growth in 2025 and 1.9% in 2026, both of which are below the 2.7% average for other 'BBB' rated countries.
The report notes that the tourism and export sectors have yet to fully recover, contributing to the weak outlook.
Despite the downgrade in its outlook, Fitch confirmed that the ‘BBB+’ rating is being maintained due to several core strengths.
These include Thailand’s robust foreign finances and a persistent current account surplus, a cautious approach to macroeconomic policy, and a government debt profile where the majority is in Thai Baht and the average interest rate is a manageable 5.7% of revenue—well below the 9.2% average for peer countries.
Fitch predicts that Thailand will continue to face budget deficits in the short term, with forecasts of 4.6% of GDP in the 2025 fiscal year and 4.3% in 2026.
However, the agency expressed concern that the path to reducing these deficits beyond 2026 remains unclear, primarily due to ongoing political uncertainty.
Looking ahead, Fitch stated that it may consider a full downgrade if public debt-to-GDP levels are not brought under control or if political gridlock significantly hinders economic activity.
Conversely, the outlook could be revised back to ‘Stable’ if the government makes clear progress in reducing its fiscal deficit and the economy achieves a strong recovery without an excessive increase in private sector debt.
