Thailand faces increasing pressure from the global economic slowdown, attributed to the impact of US tariffs, the decline in its fiscal buffer and domestic political uncertainty, according to Fitch Ratings.
Speaking at the company’s annual seminar yesterday, Thomas Rookmaaker, senior director of the sovereigns group for APAC at Fitch Ratings Hong Kong, said Fitch expects global growth to decelerate to 2.4% this year, down from 2.9% in 2024, amid evidence of a US slowdown.
Greater clarity has emerged on US tariff policy, pointing to headwinds for most of Asia where exports are a key growth engine.
China’s exports have held up so far as they have partially been redirected to other markets, noted Mr Rookmaaker.
The slower growth also delays fiscal consolidation, resulting in public discontent sparking protests over governance and cost of living pressure.
Fitch’s recent outlook revision of Thailand’s BBB+ rating to negative from stable reflects rising risks to the country’s public finances from prolonged policy uncertainty, combined with slowing global demand, a delayed tourism recovery and household deleveraging.
Thailand’s fiscal buffers have eroded in recent years, although the government is able to finance its deficit at lower costs compared with peers and external finances form a relative strength.
Parson Singha, senior director of financial institutions at Fitch Ratings (Thailand), addressed the banking sector outlook and noted sector earnings and asset quality are deteriorating, with impaired loans rising, particularly among small and medium-sized enterprise clients.
Fitch expects bank performance to remain challenging in 2026 due to the weak economic environment, low loan growth and declining interest margins.
However, key loss absorption buffers such as loan-loss allowance coverage and core capital remain sound compared with regional peers and Fitch’s benchmarks.
These buffers are holding up banks’ standalone credit profiles, despite Thailand’s negative outlook for the sovereign rating.