Debt office touts Japanese rating as vindication

Debt office touts Japanese rating as vindication

Japan-based Rating and Investment Information Inc's (R&I) move to maintain Thailand's sovereign credit rating reflects confidence in the government's economic policies, says the Public Debt Management Office (PDMO).

R&I kept Thailand's sovereign credit rating at A- with a stable outlook yesterday, in support of the government's economic policy framework and the country's growth outlook, said Patricia Mongkhonvanit, director-general of PDMO.

The Japanese credit rating agency's decision is based on the government emphasising developing high value-added industries and the Eastern Economic Corridor project to stimulate economic growth and attract foreign investment inflows, said Mrs Patricia.

While Thailand and other countries have to seek more loans to compensate for higher budget deficits, Thailand's management of public finance and external finance, which aligns with the Fiscal Responsibility Act of 2018, is also a key factor contributing to R&I's decision, she said.

The pertinent issues R&I is monitoring are domestic political uncertainty and changes in the country's demographic structure that affect the implementation of economic measures, said Mrs Patricia.

Regarding the public debt, PDMO expects the public debt-to-GDP ratio will rise to 56% after the 1-trillion-baht emergency loan decree has been fully used.

The ratio remains below the 60% ceiling stipulated by the Fiscal Responsibility Act of 2018.

Public debt was near 40% of GDP before the pandemic crisis emerged in early 2020. Higher public debt stems from the 1-trillion-baht emergency loan decree issued to alleviate adverse effects from outbreak.

Mrs Patricia said a gradual rise in Thailand's public debt is in line with the trend in other countries, which have borrowed loans to mitigate the Covid-19 impact.

Thailand's public debt-to-GDP ratio stood at 52% with a value of 8.2 trillion baht as of Jan 31, according to PDMO data.

Some 73% of the debt is related to loans for domestic investment.

Both the World Bank and IMF have stated Thailand's fiscal position remains strong and there is room for fiscal policy to stimulate the economy, yet the administration remains hesitant on stimulus.

Raising the public debt ceiling is a regular talking point among opposition parties when criticising the administration. A higher public debt means increased financial burdens, a sensitive political issue.

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