Thailand risks credit rating downgrade, opposition warns

Thailand runs a “very alarming” risk of credit rating downgrades if the government does not rein in its massive pile of debt to prop up Southeast Asia’s second-largest economy, according to the country’s biggest opposition group.
Prime Minister Paetongtarn Shinawatra’s administration appears to have no concrete plan to manage public debt and the rising interest burden, Sirikanya Tansakun, deputy leader of People’s Party (PP), said in an interview in Bangkok on Wednesday.
Thailand’s interest liability measured as a ratio to state revenue is set to exceed key thresholds monitored by some credit ratings companies in fiscal year 2026, the opposition member said. 
“Interest burden will rise to about 13% of government revenue in 2026. That’s very alarming,” said Ms Sirikanya, who often leads the opposition’s criticisms of the government’s economic policies. “That will be above the thresholds of the current investment grade ratings set by both S&P and Moody’s.”
Thailand’s sovereign rating has remained a couple of notches above junk grade at S&P Global, Moody’s Ratings and Fitch Ratings in recent years even though public debt ballooned during the pandemic as the government unveiled fiscal stimulus to shield the economy. A tepid post-pandemic recovery has put pressure on state finances, forcing the government to raise the legal cap on public debt to 70% of gross domestic product.
Thailand is rated Baa1 at Moody’s and BBB+ at S&P and Fitch — up to three levels above junk territory. S&P and Fitch both retained their ratings for Thailand in November with stable outlook, while Moody’s affirmed its rating in April.
A representative for S&P declined to comment, while Moody’s did not immediately respond to an emailed request for comments. Finance Minister Pichai Chunhavajira has said the public debt will start to decline from 2027 after peaking to about 66% in 2026.
Cash stimulus
The ratio of interest burden to revenue is only one of the criteria used by rating companies to determine ratings changes — along with growth rate, fiscal deficit, debt serviceability and peer group metrics.
Higher government spending, financed partly through borrowing, is set to lift Thailand’s interest-to-revenue ratio to 12.2% in 2026, according to calculations by Bloomberg, based on estimates by the Fiscal Policy Office (FPO). That is a significant increase from a projected ratio of 8.15% this year and 9% in 2025. 
The new government of Ms Paetongtarn, daugther of former premier Thaksin Shinawatra, is pressing ahead with cash stimulus worth billions of United States dollars to bolster the economy that is forecast to expand 2.5% this year. Her cabinet members are also piling pressure on the Bank of Thailand (BoT) to cut interest rate and temper a rally in the baht to aid the economy.
Ms Sirikanya said there is no urgent need to roll out massive stimulus and the government should not pressure the central bank to cut interest rates.
‘Sledgehammer’
“It’s like using a sledgehammer to crack a nut,” the PP MP said, adding that the baht’s rapid gains should be curbed by normal currency interventions. “We shouldn’t use the short-term factor to determine policy that will have a long-term impact on the economy.”
The threat of political instability will continue to cloud the outlook for the Thai economy and unnerve foreign investors, Ms Sirikanya said, accusing Ms Paetongtarn’s government of not doing enough to prevent judicial activism that threatens elected governments and political parties.
Thailand was plunged into a political turmoil last month after the Constitutional Court dismissed Srettha Thavisin as leader in an ethics violation case and disbanded Ms Sirikanya’s former political party, Move Forward, with its top leaders banned from politics for 10 years. Surviving lawmakers of the party, which won the most votes in the country’s May 2023 general election, have since regrouped as the PP.
Ms Paetongtarn drew some criticism earlier this week when she said her government would prioritise economic stimulus and flood relief over efforts to amend the 2017 military-drafted constitution. The ruling Pheu Thai Party, which leads the coalition, has also backtracked on a bid to amend some sections of the charter to curb the sweeping powers of the Constitutional Court to determine ethical standards that are ground for dismissals.
“The government isn’t doing enough to challenge the system, to prevent such unpredictability against the executive and legislative branches in the future,” Ms Sirikanya said. “There’s no effort to amend laws to restore confidence in stability, when lawfare is worse than unrest.”