Moody’s cuts Thailand outlook, warns on populist policies: TDRI

TDRI Scholar says Moody’s downgrade Thailand's outlook to “negative” reflects rising economic risks, urges government to halt cash handouts and focus on sustainable measures instead.

Nonarit Bisonyabut, Senior Research Fellow at the Thailand Development Research Institute (TDRI), commented on Moody’s Investors Service’s recent revision of Thailand’s credit outlook from “Stable” to “Negative.” He explained that this adjustment pertains only to the outlook, indicating a worsening trend, and does not constitute an actual downgrade of the country’s credit rating. Therefore, the cost of borrowing and financial expenses are unlikely to rise at this stage.

However, the shift to a negative outlook serves as a warning that both current and future risks are increasing. The government must implement sound policies to help steer the outlook back in a more positive direction.

This also implies that the government must avoid implementing policies that could further worsen the situation, particularly populist measures that are ill-suited to addressing today’s major threats, such as "Trump-style" policies, as well as long-standing structural issues like high household debt and a rising public debt burden."At this point, government policies should aim for sustainable solutions, not just temporary fixes or superficial handouts. Measures like giveaways or incurring debt without generating real economic growth will not solve the underlying problems," he emphasised.

When asked whether the digital wallet cash handout program should still proceed under the current circumstances, Nonarit expressed his personal view that it should not. He cited the program’s low efficiency as a key concern.

He further noted that recent economic assessments show only a modest decline in growth, around 1% of GDP, which suggests that the economy is not contracting severely enough to warrant short-term stimulus measures.

Instead, he emphasised that the urgent priority for Thailand’s economy now is to implement necessary structural economic reforms rather than temporary spending programs.

Jirayu Huangsap, Advisor to the Prime Minister, commented on the action by Moody’s Ratings, stating, “I believe the downgrade was premature. Both Thailand and many countries around the world are still in talks with the United States, and no concrete outcomes have been announced yet. If the results turn out to be positive, how will Moody’s respond?”

He added that the government has already prepared measures on all fronts, particularly in response to potential tariff issues. For the second half of the year, economic stimulus policies will focus on four major engines of growth: domestic private consumption, international trade, government spending and investment, including both public and private sector investment.

He further noted that Moody’s decision to maintain Thailand’s credit rating at Baa1 still reflects confidence in the country's financial institutions and governance system. It indicates Thailand’s strong debt repayment capacity and robust external position, including a high level of foreign exchange reserves.

Despite global challenges arising from US tariff policies, Jirayu remains confident that Thailand's GDP will improve in the second half of the year as the situation stabilizes. Although Moody's originally projected Thailand’s growth at 2.9% last year, the forecast was revised downward to 2.0% due to the impact of US policies. However, this still positions Thailand’s GDP growth in positive territory, unlike some countries facing negative growth. He is confident that the government’s policies in the second half of the year will drive higher GDP growth for the country.

(2025/04/30-00:00)