Thailand’s economic recovery may encounter impediments owing to a global economic deceleration. The economic stimulus policies introduced by the new coalition government also carry the potential for elevating government debt levels, as per the analysis of Fitch Ratings analysts.
It is anticipated that Thai banks will maintain a certain degree of ratings cushion thanks to their improving financial performance and the possibility of government or shareholder support.
The mid-year sector outlook for banking systems in advanced economies, such as the United States, the United Kingdom, Germany, and Australia, leans unfavorably. In contrast, emerging-market banking systems, including Thailand’s, present a relatively more benign outlook, notwithstanding the challenging conditions prevailing in some key markets.
The United States is predicted to undergo a modest economic downturn, while Europe is expected to witness subpar growth due to persistent inflation. China’s growth trajectory is showing signs of deceleration due to a substantial downturn in the property sector. Thailand is similarly impacted by the subdued global backdrop, with declining merchandise exports and tourist arrivals still below pre-pandemic levels.
The recently formed multi-party coalition government may foster consensus-driven policy formulation. However, divergent viewpoints within the coalition could potentially lead to budgetary delays. Thai banks are projected to retain some ratings flexibility, though the outlook for banking systems in developed economies tends to skew negatively.
Notwithstanding the challenges, Fitch Ratings envisions a more favorable outlook for emerging-market banking systems. In Thailand, the rating outlook for all banks remains stable, with the largest private commercial banks holding a ‘BBB’ Issuer Default Rating with Stable Outlooks. This is underpinned by their Viability Ratings, which align with their Government Support Ratings. Fitch anticipates that the upcoming two years will provide conducive conditions for banks to foster profitable growth and bolster capital, despite potential risks associated with restructured loans. Major banks are actively exploring growth opportunities in both domestic and international non-bank sectors.
As the global economic slowdown persists, casting a shadow over Thailand’s economic resurgence, Fitch Ratings analysts underscore the potential challenges on the horizon. While the government’s economic stimulus initiatives aim to reinvigorate the economy, they also entail the risk of escalating government debt.
While there are discernible positive developments within the banking sector, such as improving financial performance and potential government or shareholder support, the overall sector outlook remains uncertain. Advanced economies, including the United States, the United Kingdom, Germany, and Australia, confront a prevailing downside risk in their mid-year sector outlook for banking systems. Conversely, emerging-market banking systems, including Thailand’s, present a more optimistic outlook, despite the challenging conditions in select major markets.
The reverberations of the global economic backdrop are palpable in Thailand’s economy. Sluggish merchandise exports and tourism figures, which have yet to fully recover to pre-pandemic levels, are exerting a dampening effect on the country’s growth prospects. Furthermore, the newly established multi-party coalition government, while potentially conducive to consensus-driven policy-making, may encounter obstacles due to divergent perspectives within the coalition, potentially impeding the budgetary process.
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