BANGKOK, Thailand – Last week, several organizations took turns hammering down on the state of Thailand’s economy without hesitation:
Thailand’s Economic Growth Downgraded: The IMF, World Bank, Ministry of Finance, Bank of Thailand, and domestic research institutes have revised Thailand’s GDP growth forecast for this year and next to below 2%. The country is expected to have the lowest growth in the region.
Moody’s Cuts Thailand’s Credit Outlook: Moody’s has downgraded Thailand’s credit outlook from stable to negative. While Thailand’s sovereign debt rating remains unchanged, the outlook now suggests a higher probability of a downgrade in the future, which would impact both government and private sector debt ratings.
Bank of Thailand Cuts Interest Rates Again: The Monetary Policy Committee (MPC) lowered the policy interest rate for the second time in six weeks, reflecting the country’s economic vulnerability.
The question remains: Why does the Thai economy and its management appear so “helpless” in the eyes of the global community?
- Global Trade Shift:
The United States’ tariff hikes on imports have drastically altered global trade dynamics, ushering in a new, unpredictable trading system. The ongoing uncertainty about future trade terms with the US poses risks for global economic stability, including Thailand’s exports.
- Global Economic Slowdown:
Last month, the IMF downgraded its global economic growth forecast to 2.8% this year and 3% next year, mainly due to the US tariffs and other policy uncertainties. As a result, Thailand’s economy was also downgraded to 1.8% growth this year, the lowest in Southeast Asia.
- Thailand’s Struggling Economy:
Thailand’s economic recovery post-pandemic remains sluggish. Domestic consumption, exports, and investment continue to face challenges. The government’s response, such as stimulus measures and borrowing, lacks sufficient reform to address structural issues.
- Moody’s Concern Over Fiscal Health:
Moody’s expressed concerns that Thailand’s ability to meet its debt obligations may be compromised due to a weakening economy. This, combined with the uncertainties surrounding trade with the US, raises further doubts about the country’s fiscal stability. If the outlook is downgraded further, it could trigger a chain reaction affecting both public and private debt ratings.
The reality, as investors see it, is that Thailand’s prolonged low growth, political instability, outdated economic structure, and poor governance have turned the country into an example of what not to do for economic growth. The outlook is grim, and unless significant reforms are made, the Thai economy is at risk of further deterioration.
