Thai Economy Faces Credit Downgrade Risk from Debt and Low Growth

Bangkok Business News: Mounting Fiscal Strain

Thailand is facing increasing pressure on its financial stability, with concerns growing over chronic deficits and sluggish economic growth. Analysts warn that the nation’s sovereign credit rating may soon be downgraded as debt piles up and investor confidence weakens. This Bangkok Business News report highlights how the situation is being shaped by both long-standing economic weaknesses and short-term fiscal strains.

Thailand’s fiscal weaknesses and low growth spark fears of a sovereign credit downgrade.
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Outlook Downgrade and Rising Debt

Moody’s recently shifted Thailand’s credit outlook from stable to negative, with Fitch and S&P possibly following suit. Public debt remains high, compounded by over two decades of recurring budget deficits averaging between 4% and 10% of GDP. Economists caution that persistent borrowing is pushing the debt-to-GDP ratio dangerously close to the legal ceiling. Interest payments already consume nearly 9% of state revenues and are forecast to reach 11% next year, a level usually considered unsustainable for investment-grade economies.

Growth Trap and Structural Weaknesses

The real concern, however, lies in Thailand’s entrenched low-growth trap. The economy has expanded at just 2–3% annually, far below regional peers. Analysts argue that without structural reforms to enhance productivity and diversify beyond tourism and exports, growth potential will remain depressed. Populist cash handouts have offered temporary relief but have failed to stimulate long-term expansion, while an ageing population continues to shrink the tax base.

Calls for Reform and Broader Tax Base

Experts propose expanding the tax base, gradually raising VAT, and curbing wasteful spending. Currently, only about 10% of the workforce pays personal income tax, while generous corporate privileges cost the state over 200 billion baht annually. Publishing transparent data on tax expenditures and establishing stronger fiscal oversight have also been recommended to restore investor trust.

Risks of Inaction

Thailand’s fiscal stability is not yet in crisis, as most debt is baht-denominated and held domestically. However, confidence in the government’s ability to manage its finances will be critical. A downgrade could raise borrowing costs and dampen foreign investment, amplifying economic challenges. Without decisive reform, the nation risks falling further behind its regional competitors while struggling with debt repayment pressures.

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