Even with digital wallet, S&P affirms stable outlook
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Even with digital wallet, S&P affirms stable outlook

Prime Minister Srettha Thavisin elaborates on the digital wallet scheme at Government House in November last year. (Photo: Chanat Katanyu)
Prime Minister Srettha Thavisin elaborates on the digital wallet scheme at Government House in November last year. (Photo: Chanat Katanyu)

S&P Global Ratings says it plans to maintain its stable outlook for Thailand's sovereign ratings even if the country implements the digital wallet scheme.

The rating agency advised the Thai government to balance social spending with fiscal prudence.

The proposed digital wallet handout will benefit certain segments of the population and increase domestic consumption, Kim Eng Tan, managing director of sovereign ratings for Asia-Pacific at S&P Global Ratings, said at a seminar in Bangkok on Thursday.

Public debt-to-GDP ratios in several countries rated by S&P, including Thailand, have increased over the past few years because of the pandemic, he said.

The Thai government has had relatively low fiscal budget deficits compared with other countries, said Mr Tan, giving it room to increase public debt with slightly larger fiscal deficits.

With an economic recovery, the government can afford higher expenditure, including social and infrastructure spending, with limited impact on fiscal conditions, he said.

S&P will maintain Thailand's sovereign credit rating at BBB+ with a stable outlook if the digital wallet scheme is implemented, said Mr Tan.

The Thai government has been relatively prudent in fiscal budget management compared with other countries with S&P sovereign ratings, according to the rating agency.

"The existing outlook is stable for the Thai BBB+ rating and we don't anticipate adjusting the rating for 1-2 years unless there are significant changes in the Thai economic outlook," he said.

However, the Thai government should balance social objectives with fiscal prudence in the near future, said Mr Tan.

Although Thailand's economy has recovered from the pandemic, its GDP growth is slower compared with regional peers.

The financial condition of the Thai government has weakened based on rising public debt and lower economic growth, which S&P considers for its ratings, as well as real GDP growth per capita, he said.

From 2010 to 2023, Thailand's real GDP per capita grew on average by 1.8% a year, compared with 3.1% for Malaysia, 3.4% for Indonesia and the Philippines, and 4.9% for Vietnam.

Economic stimulus would support growth temporarily, so economic sustainability is crucial for GDP growth in the long term, according to S&P.

Governments aim to grow GDP to support income growth for government, businesses and households, while generating positive political and social stability, said the rating agency.

While social spending can increase short-term growth, achieving long-term growth remains a key challenge for all governments.

Mr Tan said each country must improve productivity, competitiveness or economic fundamentals based on their unique economic contexts. Structural spending in areas such as education, healthcare, infrastructure, talent, labour skills and technology can stabilise economic growth in the long run, he said.

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