On April 29, 2025, Moody's Investors Service announced a significant change in Thailand's credit outlook, downgrading it from "Stable" to "Negative" while affirming the sovereign credit rating at Baa1. This decision reflects growing concerns about the country's economic and fiscal strength, indicating that Thailand may face ongoing challenges in the near future.
Moody's also maintained Thailand's senior unsecured bond rating at Baa1 and affirmed the commercial paper rating at P-2. The change in outlook was discussed during a meeting of the Credit Rating Committee on April 24, 2025, where various factors influencing the rating were considered. Among these were the weakening fiscal strength and competitiveness of the Thai economy.
The rating agency pointed out that the adjustment to a negative outlook signals risks that Thailand's economic and fiscal strength could weaken further. This concern is compounded by recent developments, including the potential impact of U.S. tariffs on international trade, which could adversely affect Thailand's open economy. Moody's noted that the uncertainty surrounding additional tariffs from the U.S. after a 90-day grace period could exacerbate the already fragile economic recovery following the COVID-19 pandemic.
According to Moody's, the Thai economy's short-term growth prospects are now projected to be significantly affected, with real GDP growth expected to drop to 2% in 2025, down from a previous forecast of 2.9% made just six months prior. This revision reflects the negative pressures that could further weaken the fiscal status of the government, which has already deteriorated since the onset of the pandemic.
"The recent U.S. tariffs are expected to have a substantial impact on global trade and economic growth, which in turn will affect Thailand, given its reliance on exports," Moody's stated in their report. The agency also highlighted that Thailand's GDP is sensitive to fluctuations in export demand, particularly from the U.S., which accounted for approximately 3% of Thailand's GDP in 2020.
In addition to the direct effects of U.S. tariffs, Thailand's involvement in regional supply chains means that any disruption in trade could lead to indirect impacts on the country's manufacturing sector. The agency expressed concern that if excess exports from China were redirected to Thailand, it could place additional strain on local production.
Furthermore, Moody's indicated that the ongoing trade tensions could lead to a decline in foreign direct investment (FDI) in Thailand, as seen during the trade disputes between the U.S. and China in 2018-2019. The uncertainty surrounding the global economic landscape could hinder Thailand's ability to diversify its supply chains, particularly under the "China+1" strategy aimed at reducing reliance on Chinese manufacturing.
A recent earthquake in Myanmar has also raised concerns about the potential negative impact on Thailand's growth, as safety concerns may deter tourists, further complicating an already challenging recovery from the pandemic.
Dr. Kopasak Phutrakul, a prominent figure in Thailand's banking sector and former Deputy Secretary-General to the Prime Minister, commented on the downgrade, stating that Moody's is the first of the three major ratings agencies to adjust its outlook on Thailand. He emphasized that the negative outlook serves as a warning signal, suggesting that the country's economic and fiscal strength may be at risk.
Despite the downgrade, Moody's still recognizes some strengths in Thailand's credit profile, particularly its substantial foreign exchange reserves, which stood at $215 billion as of March 2025. This amount is sufficient to cover approximately seven months of imports, providing a buffer against external shocks.
Moody's also noted that Thailand's fiscal consolidation is expected to be slower than previously anticipated, which could further complicate efforts to improve the country's fiscal health. The agency highlighted that the government's debt burden has increased by approximately 22% since the pandemic, reaching roughly 56% of GDP in the fiscal year 2024.
The Bank of Thailand has expressed concerns regarding the vulnerability of the country's external finances, indicating that the ongoing geopolitical tensions and trade policies could pose challenges to Thailand's economic stability.
Looking forward, Moody's emphasized that Thailand could improve its credit outlook if it manages to address key concerns regarding its economic performance and fiscal health. The agency believes that achieving a consistent growth rate of 3-4% could help restore confidence in the country's economic prospects.
In response to the downgrade, various stakeholders in Thailand's government and business sectors are urged to take proactive measures to enhance the country's resilience against external shocks. This includes focusing on fiscal discipline, boosting investments, and fostering a more robust economic environment.
As Thailand navigates these challenging times, the government is called upon to implement effective strategies that can stimulate long-term growth and reduce reliance on external factors. The path ahead requires a concerted effort to bolster the economy and restore investor confidence.
