Thailand’s government has challenged the decision by the ratings agency Moody’s to downgrade its economic outlook for the country, with a spokesperson saying that it should have waited for Thai officials to conclude ongoing trade talks with the U.S. government.
In a statement issued late on Tuesday, Moody’s Ratings announced that it was downgrading Thailand’s rating outlook from “stable” to “negative,” citing the likely impacts of U.S. tariffs, which would likely have a “material negative impact” on the country’s economy.
“The decision to change the outlook to negative from stable captures the risks that Thailand’s economic and fiscal strength will weaken further,” it stated. The “shock” of President Donald Trump’s April 2 tariff announcement, which saw Thailand hit with a 36 percent tariff, “exacerbates Thailand’s already sluggish economic recovery post-pandemic, and risks aggravating the trend decline in the country’s potential growth,” it added.
However, Moody’s affirmed Thailand’s sovereign rating at an investment-grade Baa1 due to the country’s “moderately strong institutions and governance which support sound monetary and macroeconomic policies.”
In response, government spokesperson Jirayu Houngsub said that the Moody’s downgrade was premature and should have awaited the outcome of the nation’s trade talks with the U.S. These were supposed to start on April 23, but were subsequently delayed because the U.S. government had asked Bangkok to review a number of issues, including its own tariffs on U.S. goods, Prime Minister Paetongtarn Shinawatra announced.
“Thailand and other countries around the world are still in the negotiation process, and there are no clear results yet,” Jirayu said in a statement quoted by Bloomberg. “If our results are positive, how will Moody’s change its analysis?”
Despite the best efforts of Thailand’s current government, which has made the economy its focus, the economy has struggled to recover from the economic recession of the COVID-19 pandemic. The Thai economy grew just 1.9 percent in 2023 and 2.5 percent in 2024, down from an average of 3.5 percent during 2015-2019, according to the World Bank. In its latest regional economic outlook, released last month, the World Bank said that the economy was projected to grow by just 1.6 percent this year, nearly halving the 3.0 percent projection that it made in October. Moody’s similarly lowered its forecast for Thailand’s GDP growth in 2025 to about 2 percent, down from the 2.9 percent projection it made six months ago.
In an article last year, The Diplomat’s James Guild argued that Thailand’s economic woes stem from a growing mismatch between global macroeconomic conditions and Thailand’s export-dependent economy. “Right now, Thailand’s main problem is something that they have no control over and cannot fix, which is that global demand for Thai goods and services is weak,” he wrote. (Any U.S. tariff on Thai imports will only weaken this demand further.) This has been compounded by the country’s levels of household debt, which at 89.6 percent of GDP are among the highest in Asia and have acted as a brake on domestic consumption.
To promote recovery, the Pheu Thai government has introduced policies to attract more foreign tourists and announced a 450 billion baht ($13.1 billion) stimulus, under which around 45 million Thais will be eligible to receive 10,000 baht ($290) payments to boost domestic consumption. The Finance Ministry has also proposed debt relief measures for households and small businesses. But the stimulus program, now into its third phase, has been controversial, with increasing numbers of people questioning whether it will be anything more than a temporary salve to Thailand’s economic problems. As Tita Sanglee wrote in these pages in March, “the debate is increasingly less about whether it’s a bad idea and more about just how bad it is.”
Indeed, the Moody’s downgrade prompted calls from the opposition People’s Party for the government to suspend the next phase of the stimulus plan. “This is a wake-up call for the government to finally get serious about handling the economy that’s getting hit by the trade war,” the party’s deputy leader, Sirikanya Tansakun said, according to Bloomberg.