Moody's Revises Thailand's Outlook to Negative from Stable; Maintains Baa1 Rating - Thailand Business News (2025)

Singapore, April 29, 2025 — Moody’s Ratings has affirmed Thailand’s Baa1 issuer and local currency senior unsecured ratings, while revising the outlook to negative from stable. Additionally, Thailand’s foreign currency commercial paper rating remains at P-2.

Key Points

• Moody’s Ratings affirmed the Government of Thailand’s Baa1 issuer and local currency senior unsecured ratings and changed the outlook to negative from stable on April 29, 2025.
• The decision to change the outlook to negative captures the risks that Thailand’s economic and fiscal strength will weaken further, partly due to announced US tariffs and uncertainty of additional tariffs after a 90-day pause.
• Moody’s lowered Thailand’s real GDP growth to about 2% for 2025 from 2.9% forecasted six months ago.
• The affirmation of the Baa1 ratings reflects Thailand’s moderately strong institutions and governance, moderately strong debt affordability, and strong external position with ample foreign exchange reserves buffer.
• It is unlikely the rating will be upgraded in the near-term given the negative outlook, and a downgrade is possible if Thailand’s economic strength erodes further or if the government debt burden increases.

The decision to change the outlook to negative from stable captures the risks that Thailand’s economic and fiscal strength will weaken further. The already announced US tariffs are likely to weigh significantly on global trade and global economic growth, and which will affect Thailand’s open economy. In addition, there remains significant uncertainty as to whether the US will implement additional tariffs on Thailand and other countries, after the 90-day pause elapse. This shock exacerbates Thailand’s already sluggish economic recovery post-pandemic, and risk aggravating the trend decline in the country’s potential growth. Material downward pressures on Thailand’s growth raises risks of further weakening in the government’s fiscal position, which has already deteriorated since the pandemic.

The affirmation of the Baa1 ratings highlights Thailand’s moderately strong institutions and governance, which underpin effective monetary and macroeconomic policies. These ratings also consider Thailand’s relatively strong debt affordability, despite a significant rise in government debt since the pandemic. This is supported by deep domestic markets and the fact that nearly all government debt is denominated in local currency. Additionally, Thailand benefits from a robust external position, bolstered by substantial foreign exchange reserves.

Thailand’s local and foreign currency country ceilings remain unchanged at Aa3 and A1, respectively. The four-notch gap between the local currency ceiling and sovereign rating reflects a balance between the country’s strong external balances and effective institutions, against the government’s relatively large footprint in the economy and moderate political risks. The one notch gap between the foreign currency ceiling and the local currency ceiling takes into account Thailand’s history of imposing capital controls, although its low external indebtedness and high policy effectiveness reduce the risks of potential transfer and convertibility restrictions.

Reason for Shifting Outlook from Stable to Negative

Growing Concerns Over Deteriorating Economic and Fiscal Stability

The already announced US tariffs are likely to weigh significantly on global trade and global growth, with material negative impact on Thailand, increasing risks that Thailand’s economic and fiscal strength will weaken further. In addition, there is significant uncertainty as to whether the US will implement additional tariffs on Thailand and other countries, after the 90-day pause elapse.

Thailand’s near-term growth will likely be materially dented, directly through its large export exposure to the US. Latest available OECD data show that Thailand’s domestic value-added in its gross exports to the US amounted to about 3% of GDP in 2020. Thailand will also be indirectly exposed through its participation in regional value chains, where it provides inputs to other countries’ exports. Thailand’s growth pressures will intensify further if China’s export surplus is increasingly being diverted to Thailand, which will weigh on the domestic manufacturing sector.

We expect the change in US trade policy to dampen business sentiment, thereby curbing investments in many countries, including in Thailand. For example, during the escalation of US-China trade tensions in 2018-2019, growth in Thailand’s foreign direct investment and gross fixed capital investment in 2019 was lower compared to 2018. Heightened uncertainty may also hurt the “China+1” strategy or slow the pace of supply chain diversification away from China, which will also weaken investments in Thailand.

Moreover, the recent earthquake in Myanmar which affected Thailand, adds downside risks to Thailand’s growth. Safety concerns may lead to lower tourist arrivals for some time, worsening the recent slowdown in tourist arrivals over a separate safety incident earlier this year.

Taken together, a significant weakening in Thailand’s near-term growth could exacerbate Thailand’s existing structural challenges, driving further declines in its potential growth. Overall, we lower Thailand’s real GDP growth to about 2% for 2025, from 2.9% forecast six months ago. Our revised projection is subject to downward risks, amid a still-evolving situation and persistent uncertainty.

Material downward pressures on Thailand’s growth increase the risks of further weakening in Thailand’s fiscal position, which has already deteriorated since the pandemic. Thailand’s government debt burden rose by about 22 percentage points to about 56% of GDP in the fiscal year 2024 from the fiscal year 2019. The country’s sluggish recovery is already impeding fiscal and debt consolidation. The government’s medium term fiscal framework (MTFF), published in December 2024 (predates the recent US tariff announcement), was already signaling a further delay in fiscal and debt consolidation compared to the MTFF published in May 2024. Overall, we expect Thailand’s slower growth to add pressures to the government debt burden. Risks to the country’s fiscal position could be mitigated with effective measures to raise government revenue and boost longer-term growth.