Moody's downgrade sends a signal

Thailand must accelerate its economic growth potential to 3-4% to avoid a downgrade in its sovereign credit rating, say analysts.

- SOMRUEDI BANCHONGDUANG WICHIT CHANTANUSORNSIRI NAREERAT WIRIYAPONG

Kobsak Pootrakool, director and senior executive vice-president at Bangkok Bank, said in a Facebook post yesterday Moody's Investors Service revised Thailand's outlook from stable to negative, the first step in a potential credit rating adjustment and possibly leading to a future downgrade.

WARNING SIGNAL

Moody's is the first global credit ratings agency to revise its outlook on Thailand, potentially prompting the other two major agencies — S&P Global Ratings and Fitch Ratings — to review and possibly adjust their assessments as well, he said.

According to Mr Kobsak, Thailand's outlook downgrade by Moody's is primarily based on concerns that the nation's economic and fiscal strength could deteriorate further, particularly in light of US trade and tariff policies.

These global headwinds threaten international trade and economic growth, posing significant risks for Thailand's export-driven economy.

"The downgrade to a negative outlook does not necessarily imply that a credit rating cut is imminent. However, it serves as a warning sign — an indication of increased risk," he said.

During the 2008 global financial crisis, Thailand's outlook was also downgraded to negative by Moody's. However, after navigating the crisis, the outlook was restored to stable within two years.

Moody's indicated the outlook could be revised back to stable if Thailand demonstrates sustained economic growth above current expectations, thereby improving its fiscal position.

Mr Kobsak said a credit rating downgrade would likely stem from further weakening of Thailand's economy, with potential growth declining due to structural challenges and global economic instability, particularly influenced by US trade policies.