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Fitch3Thailand Faces Lingering Political and Fiscal Uncertainty After Elections

      Fitch Ratings-Hong Kong-19 May 2023: Political and fiscal uncertainty looks set to remain a near-term drag on Thailand’s credit profile after the recent general election, even as the country continues to benefit from robust external finances, a strong macroeconomic policy framework and economic recovery as tourists return, says Fitch Ratings.

Thailand’s Election Commission has up to 60 days to announce official results following the election on 14 May, but its preliminary figures suggest that the opposition Move Forward Party (MFP) gained the most seats in the lower house of parliament, with the previous largest opposition group, the Pheu Thai Party (PTP) coming second.

To demonstrate a parliamentary majority and choose the next prime minister, a party and its candidate need at least 376 votes from a joint sitting of parliament, comprising the 500 new lower house MPs and the 250-member Senate appointed by the previous military-led government before the 2019 election.

It remains unclear whether MFP will be able to secure sufficient support to form a coalition government with PTP and smaller parties. Potential partners could include a diverse set of parties, with a wide range of policy priorities. Effective policymaking may be temporarily constrained if the coalition building process delays the formation of a new government for several months.

Even so, near-term credit effects will be limited in our base case. When we affirmed Thailand’s rating at ‘BBB+’ with a Stable Outlook in November 2022, we stated that a broad, fragmented coalition government could emerge, complicating effective policymaking, but that it was unlikely to lead to major shifts in the country’s key economic development policies. The fiscal policy outlook is uncertain, but we assume the next coalition government will remain committed to some of the outgoing administration’s key economic policies.

There could be some disruption to spending under the budget for the fiscal year ending September 2024 (FY24) if coalition negotiations drag on, as occurred with the FY20 budget after the 2019 elections. For the FY24 budget to pass, it needs separate approval from the lower house and the Senate, and the endorsement of the king. Delays to the FY24 budget would be negative for Thailand’s economic prospects, but we would still expect growth to accelerate in 2023 and remain robust in 2024, with the tourism sector’s recovery and private consumption serving as the main drivers.

Thailand’s public finance metrics significantly deteriorated during the Covid-19 pandemic, eroding its headroom at the current rating level, but Fitch forecasts general government debt/GDP and interest/revenue will remain broadly in line with the median for ‘BBB’ category sovereigns over 2023-2024. If the next government fails to stabilise the government debt ratio, for instance due to continued spending pressures or external shocks outside our baseline assumptions, that would put downward pressure on the sovereign rating.

During the campaign major parties advocated policies that may require significant additional expenditure. This could challenge fiscal consolidation prospects, particularly in the context of adverse demographic factors. However, other factors, including the pacing of any spending increases and revenue growth, will influence fiscal outcomes too.

More protracted political uncertainty, or a substantial escalation of social tensions over the process of government formation, could also pose risks to Thailand’s credit profile, though this is not our baseline assumption. We said in November that heightened political disruption on a scale sufficient to alter Thailand's economic policymaking effectiveness and growth prospects could result in negative rating action.



George Xu

Director, Sovereigns

+852 2263 9629

Fitch (Hong Kong) Limited

19/F Man Yee Building

68 Des Voeux Road Central, Hong Kong


Thomas Rookmaaker

Head of APAC Sovereigns

+852 2263 9891


Duncan Innes-Ker

Senior Director, Fitch Wire

+852 2263 9993


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