JCR upbeat on Thailand's economic prospects

JCR upbeat on Thailand's economic prospects

Affirms sovereign credit rating at A-

Japan Credit Rating Agency (JCR) remains upbeat on Thai economic prospects, expecting the country's economy to return to positive growth of around 3% in 2021 this year after contracting 6.1% in 2020 while affirming Thailand's sovereign credit rating at A- with a stable outlook.

According to Patricia Mongkhonvanit, director-general of the Public Debt Management Office, (PDMO), the Japanese rating firm has seen that the Thai economy has begun recovering after bottoming out in the second quarter of 2020 partly thanks to the effect of the government's large-scale financial and fiscal package worth 1.9 trillion baht (equivalent to 12% of GDP).

"While the resurgence of the pandemic needs to be closely watched, the economy is expected to return to a positive growth of around 3% in 2021," she said, citing JCR's report.

According to JCR, the government has been complying with the fiscal discipline stipulated by law, with both the fiscal balance and government debt kept at sound levels in GDP terms.

In fiscal 2020, the fiscal deficit widened to 4.6% of GDP due to the enforcement of the anti-pandemic fiscal package. The fiscal 2021 budget plans to reduce the fiscal deficit to 3.7% of GDP.

Public debt rose due to the expansion of the fiscal deficit, reaching 53% of GDP at the end of February. But it still stayed at a manageable level as it was below the 60% limit set by law.

Meanwhile, in the banking sector, the impact of the pandemic has so far been minimal. Although the gross non-performing loan ratio at commercial banks was moderately going up, it still remained relatively low at 3.11% at the end of 2020, with their capital adequacy ratio kept sound at 19.6% (Tier I ratio at 16.5%).

In 2020, although the trade surplus expanded due primarily to a faster fall of imports than exports, the current account surplus in GDP terms declined to 3.3% from 7.0% in 2019 due to a bigger service account deficit mainly resulting from a reduced number of foreign tourists.

The foreign currency reserves (excluding gold) stayed high at US$245.3 billion at the end of February on an accumulation of current account surpluses.

The reserves were 4.0 times the country's short-term external debt, largely exceeding its gross external debt which totalled $172.0 billion at the end of September 2020. These indicate that Thailand retains its resilience to external shocks, said JCR.

Ms Patricia said issues JCR pays a keen interest in and keeps a close eye on are Thailand's political uncertainty and ongoing reform policies aimed at industrial advances.

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