Thai PM Anutin vows prudent policy to ward off ratings downgrade
Anutin’s pledge to hold a vote in four months “could lead to near-term spending pressures and adds to policy uncertainty,” according to Fitch
[BANGKOK] Thailand will take all possible measures to avert a sovereign credit rating downgrade, Prime Minister Anutin Charnvirakul said, a day after Fitch Ratings lowered the nation’s outlook citing rising risks to public finance.
“We will implement prudent economic policies to prevent any deterioration in the country’s debt burden,” Anutin told representatives of Thailand’s capital markets in Bangkok on Thursday (Sep 25). “We will take all steps needed to avoid any further cut in the country’s credit rating.”
Fitch cited prolonged political uncertainty, growth headwinds from slowing global demand, and a delayed tourism recovery among the reasons for revising Thailand’s credit rating outlook to negative from stable on Wednesday. It followed a similar move by Moody’s Ratings, adding to concerns that expansive fiscal policies by successive governments to shore up growth may eventually result in rating downgrades.
Anutin and his Cabinet were sworn into office on Wednesday, the third government since a messy general election in 2023. Ahead of an election he’s promised to call within months, Anutin promised to tackle high living costs and help households and millions of small and medium enterprises saddled with pandemic-era debt.
Thailand’s sovereign ratings at S&P Global Ratings, Moody’s and Fitch have stayed a few notches above speculative grade in recent years, despite a surge in public debt from fiscal stimulus to support the Covid-stricken economy. A sluggish post-pandemic recovery has strained public finances, prompting the government to lift the statutory public-debt ceiling to 70 per cent of gross domestic product. It stood at 64.5 per cent at the end of July, according to official data.
Anutin’s pledge to hold a vote in four months “could lead to near-term spending pressures and adds to policy uncertainty,” according to Fitch, which retained Thailand’s rating at BBB+.
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Bank of Thailand governor Sethaput Suthiwartnarueput earlier this month warned that the nation’s credit rating could come under pressure due to the political risk hanging over the economy and the need for near-term fiscal consolidation.
Fund flows
Finance Minister Ekniti Nitithanprapas said the government will try to address Fitch’s economic concerns and adhere to fiscal discipline to boost investor confidence. The government is also committed to overhauling the medium-term fiscal framework and lowering deficit to 3 per cent of GDP in the long term, he said. The target shortfall is 4.3 per cent of GDP for the fiscal year 2026.
Thailand’s economy is expected to grow about 2 per cent this year – roughly half the pace projected for Indonesia and the Philippines – held back by higher US tariffs, softer tourist arrivals, high household debt, and a stronger baht.
Anutin said his government will tighten monitoring of any “suspicious foreign fund inflows,” which may be contributing to an “unusual strength in the baht.” Market regulators and law enforcement agencies have been ordered to crackdown against such fund flows, he said.
The baht hit a four-year high earlier this month, sparking calls from local business groups and the tourism industry for urgent intervention as the strong currency hurts the country’s competitiveness. The currency fell 0.5 per cent against the US dollar on Thursday, heading for a third straight day of declines.
Anutin said his government will soon unveil steps to boost liquidity in the Thai stock market to bolster investor confidence. Authorities will also speed up easing of some rules and regulations previously imposed to prevent market manipulation, he said.
Thailand’s benchmark stock index is down about 8 per cent this year – the second-worst performer in Asia – after foreign investors pulled a net US$2.8 billion on concerns of political uncertainty and sluggish economic outlook. The trend can be reversed if the government agrees to a demand to waive taxes on dividend income for long-term investors, said Kobsak Pootrakool, chairman of the the Federation of Thai Capital Market Organizations. BLOOMBERG
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