Bangkok (VNA) - Thailand is confronting mounting financial risks amid weakening national debt repayment capacity, according to a recent report by the National Economic and Social Development Council (NESDC).
The report shows that the ratio of interest payments to government revenue is on track to exceed 12% by 2027, a level that could trigger a downgrade to Thailand's credit rating.
To address this mounting concern, the NESDC recommends that the government dedicate a larger portion of its budget to repaying the principal on its loans, particularly the significant debt accumulated during the COVID-19 pandemic. This will not only improve the country's debt-servicing capacity but also create more fiscal space for future economic policies.
Thailand’s current credit rating is Baa1 by Moody's, which recently assigned a "negative outlook" due to economic uncertainty and falling tourist numbers. However, S&P Global Ratings and Fitch Ratings have maintained their ratings at BBB+ with a "stable outlook," citing the country's strong tourism recovery and robust foreign exchange reserves.
Despite some positive indicators, the NESDC's report highlights several key fiscal weaknesses. The country's public debt is projected to hit the legal ceiling of 70% of GDP sooner than expected, which could severely limit the government's ability to implement future economic measures.
Additionally, the government's revenue collection remains low, standing at less than 16% of GDP. This is significantly below the average for OECD and Asia-Pacific countries, which are at 24.8% and 18.6%, respectively. The report attributes this to a tax structure that relies more on consumption than on income or assets, leading to revenue growth that is consistently slower than economic growth.
The NESDC is urging the government to implement urgent reforms to increase the efficiency of revenue collection, restructure the tax system, and expand the tax base./.
