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Thailand at risk of credit downgrade with cash handouts plan
Thailand’s plan to revive its economy through cash handouts and loan moratoriums carries the risk of a credit downgrade, according to ratings agencies.
Key Takeaways
- Thailand’s plan to boost its economy through cash handouts and loan moratoriums carries a credit downgrade risk due to growing reliance on debt and doubts about sustainable growth.
- Foreign investors have reduced their holdings of Thai sovereign bonds amid concerns of increased supplies and tension between the prime minister and the central bank governor over spending approaches.
- Ratings agencies have highlighted the risks of persistent weak economic growth, fiscal deterioration, and political tension as factors that could negatively impact Thailand’s credit ratings.
The country’s prime minister aims to increase government borrowing to boost spending and stimulate growth. However, concerns about the nation’s growing reliance on debt and doubts about its ability to sustain growth have led to foreign investors reducing their holdings of Thai sovereign bonds.
Thailand currently holds a BBB+ rating at S&P, which is two notches above the lowest investment grade it has maintained since 2004. However, ratings agencies have expressed concerns about the country’s weak economic growth, which could potentially lead to a downgrade in its credit ratings.
Thailand’s plan for cash handouts and loan moratoriums to revive its economy carries the risk of a credit downgrade, warns ratings agencies. Foreign investors have already reduced their holdings of Thai sovereign bonds due to these doubts, and ratings agencies have expressed concerns about the country’s weak economic growth, which may result in a credit ratings downgrade.
Thailand’s government has announced plans to provide every citizen with a one-time handout of 10,000 baht ($282), as well as implementing measures such as debt payment deferment and reduced energy prices. These steps are aimed at alleviating the burden of living costs and stimulating economic growth.
The handout scheme worth 560 billion baht ($15.78 billion) is set to be distributed to all Thai citizens aged 16 and above through digital wallets. This initiative was a significant part of the campaign launched by Srettha and his Pheu Thai party prior to the May election.
But Academics at the Thailand Development Research Institute (TDRI) have conducted an analysis of the policy of providing a digital cash handout of 10,000 baht, totaling approximately 560 billion baht. Their findings suggest that this policy may not have a significant impact on stimulating the economy.
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