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Thailand
Summary
Moody’s Baa1 / S&P BBB+ / Fitch BBB+1
Economy: Agriculture 9%, Industry 36%, Services 55%
Among Thailand’s key strengths are the size and diversification of its economy, the secondlargest in the Association of Southeast Asian Nations (ASEAN) after Indonesia. The economy
has proven resilient to major shocks in recent years, including the tsunami in Japan, the
floods of 2011, political noise, and El Niño in 2015–2016. Credit risk remains low in part
due to the composition of Thailand’s public debt stock, which is almost fully domestic and
widely owned by local financial entities. Currently, Thailand’s external liquidity is also good,
with foreign-exchange reserves exceeding the entire stock of external debt and among the
highest current account surpluses in the world. The political stalemate and its impact on the
economy represent the main negative for Thailand, and turmoil is likely to continue. We
expect GDP growth to be slightly above 3% over the next few years.
Economic Indicators
2012
2013
2014
2015
2016F
68.0
68.3
68.7
68.8
69.0
69.1
GDP per Capita (USD)
6,427
6,266
6,101
4,972
5,113
4,929
Nominal GDP (USD Billions)
Population (Millions)
2017F
436.8
428.0
418.9
342.3
352.7
340.6
Real GDP (%)
7.2
2.7
0.8
2.8
3.2
3.2
Year-End CPI (%)
3.6
1.7
0.6
-0.9
0.2
1.7
Fiscal Balance (% of GDP)
-0.9
0.4
-0.8
0.3
-0.4
-0.4
Interest (% of Revenues)
4.0
3.4
3.5
2.6
2.6
2.9
FC Debt/Public Debt (%)
1.3
1.9
1.9
2.0
2.0
2.1
41.9
42.2
43.6
43.1
43.6
44.3
199.9
Government Debt (% of GDP)
Government Debt (% of Revenue)
196.8
189.2
204.1
190.7
195.4
Current Account (% of GDP)
-0.3
-1.2
3.7
9.3
10.5
7.3
FDI (% of GDP)
-0.3
0.9
-0.1
-1.0
-3.5
-4.0
External Debt (% of GDP)
29.9
33.2
33.8
38.4
41.5
47.4
Foreign Reserves/External Debt (%) 138.9
117.9
110.9
119.1
126.3
120.8
Foreign Reserves (Mo. of imports)
Foreign Reserves (% of GDP)
8.0
7.3
7.4
8.2
9.3
8.9
41.6
39.1
37.5
45.7
52.4
57.3
As of November 2016
Forecasted or estimated results do not represent a promise or guarantee of future results and are subject
to change.
Sources: IMF, Haver, Citibank, Lazard
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Lazard Emerging Markets Debt
Rating History
Below is a history of the country’s foreign and local currency ratings by the major agencies
dating back to 2000. We have also included a chart of the country’s hard currency external
debt spread and the JP Morgan EMBI Global Diversified Index spread for comparison.
Rating History
Hard Currency
Local Currency
A-
A+
BBB+
A
BBB
A-
BBB-
BBB+
BB+
BBB
BB
2000
2008
Moody’s
S&P
2016
BBB-
2000
2008
Moody’s
Fitch
2016
S&P
Fitch
As of December 2016
Performance represents past performance. Past performance is not a reliable indicator of future results.
Source: Fitch, Moody’s, Standard and Poor’s, Bloomberg
Bond Spreads
Local Yield
11
9
7
NOT AVAILABLE
5
3
1
2008
2010
Thailand
2012
2014
2016
GBI-EM Global Div
As of December 2015
Performance represents past performance. Past performance is not a reliable indicator of future results.
Source: JP Morgan
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Thailand
Strengths
Large, Diversified, and Open Economy
With a GDP of US$350 billion, Thailand is the second-largest economy in ASEAN after
Indonesia.2 Key sectors are manufacturing and agriculture. While manufacturing is the larger
sector, agriculture employs almost 40% of the workforce.3 Thailand’s economy has shown
resilience, rebounding strongly from major shocks in recent years including the impact on its
manufacturing sector of the tsunami in Japan, which is a major trading partner, particularly
for cars and electronics, and major floods in 2011. Thailand’s economy is very open with
trade accounting for more than 150% of GDP, underscoring a highly competitive manufacturing sector that is well integrated in global supply chains.4
Low Rollover Risk for Public Debt
One of Thailand’s key credit strengths is the lack of currency risk on its government balance
sheet, given the combined external debt of the central government and public enterprises represents only 4.8% of GDP. Further, given Thailand’s deep financial system—bank assets were
more than 100% of GDP with total financial system assets over 300% of GDP at the end of
2015—most public debt is held locally among insurance companies, pension funds, banks,
and the publicly held government pension funds and social security office.5 The country’s
relatively large national savings also provides an important buffer.
Strong External Position
At the end of June 2016, Thailand’s external debt was 50% of GDP, but it has foreignexchange (FX) reserves of US$180 billion (72% of GDP), which provide 144% of coverage.6
The current account surplus continued to surge in 2016 on the back of low oil prices and a
dynamic tourism sector, with the current account totaling US$42 billion in June 2016, a hefty
ratio of 14.7% of GDP. The financial account has offset some of the current account surplus,
with foreign direct investment (FDI) and portfolio outflows surpassing 6.5% of GDP.
Fiscal and Public Debt Discipline
Thailand has historically maintained tight fiscal policy, running small deficits below 3.0%
of GDP over the past decade. The government has clear fiscal rules that limit the size of the
fiscal deficit. This year the fiscal deficit is expected to total around 2.5% of GDP. In addition,
the government is implementing quasi-fiscal expenditures to support agriculture companies, small and medium enterprises, and infrastructure projects totaling 13.0% of GDP.
Meanwhile, the debt to GDP has stabilized around 45% of GDP for the past five years with
central government debt totaling close to 35% of GDP.
107
Lazard Emerging Markets Debt
Weaknesses
Economic Growth
Despite solid structural fundamentals and an average growth rate of 3.1% in the past decade,
growth remains low by regional standards. Relatively low economic growth is attributable
to several factors, including political noise and structural problems, such as low investment
levels and poor education. The government is working to increase capital expenditures, but
progress has been slow. A key driver of economic growth is China, which has become an
important trade partner. Thailand tends to grow 0.25% less when China’s GDP growth
declines by 1%.
Volatile Politics
Political risk has worsened since the September 2006 coup that removed populist Prime
Minister Thaksin Shinawatra from office. Since then, the political landscape has been characterized by conflicts between pro-Thaksin “red shirts” and anti-Thaksin “yellow shirts.” The
red shirts are mostly rural workers but also include students and those who are opposed to the
urban elites and the military. The yellow shirts typically represent the urban middle class and
ultra-nationalists.
The anti-Thaksin coalition was in power from December 2007 until July 2011, when
Yingluck Shinawatra, Thaksin’s sister, won new elections in a landslide. The Shinawatra
government was removed by a military coup on 22 May 2014. The military established a
junta (National Council for Peace and Order - NCPO) that has ruled the country since then.
An interim constitution was written and the newly established national legislature elected
General Prayuth as a new prime minister.
A new constitution was submitted to a popular referendum and approved in 2016, giving
more power to the army. A new election is expected to take place in 2017 with Thailand
returning to civilian rule after three years of military government, although the military will
still hold substantial power and the ability to block government initiatives.
Monetary and Exchange Rate Policy
Inflation/Monetary Policy
The Bank of Thailand (BoT) has a single mandate: to maintain price stability. This single
objective is expressed through an inflation-targeting framework that was adopted in 2000.
Since 2015, the BoT targets calendar-year average headline inflation of 2.5% ± 1.5%, having
switched from targeting core inflation in previous years. Monetary policy decisions are made
by the Monetary Policy Committee (MPC). The committee is comosed of seven members:
three internal—BoT governor (Chairman of the MPC) and two deputy governors—and four
external members that have a fixed term of three years with a maximum of two consecutive
terms. The MPC meets every six weeks and is responsible for monetary policy and exchangerate management. In addition to the monetary policy objective, the BoT is tasked with
maintaining financial stability and managing foreign exchange.
The BoT implements monetary policy primarily by setting the policy interest rate, the overnight repurchase (repo) rate, which the central bank uses to control the overnight interest
rates and the short-term fixed income market. In addition to the policy rate, the central bank
has the option of using direct liquidity facilities. The central bank relies on four channels of
monetary-policy transmission: the credit channel, the asset price channel, the expectations
channel, and the exchange rate.
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Thailand
Over the past 10–15 years, 12-month headline inflation has been 2.0%–2.5% on average,
while core (ex-raw food and energy) has been 1.0%–1.5% on average. Over the past 10 years,
core-inflation changes year-over-year have never breached the 4% ceiling and reached a peak
of 3.75% in the third quarter of 2008 in response to the shock in commodity prices. Note
that headline inflation has a higher average and higher volatility than core inflation. The
large proportion of food (48%) and transport (25%) in the headline CPI basket explains the
persistency of the deviation.
Looking back at 2016, inflationary pressure remains subdued and monetary policy has been
accommodative. Both core and headline inflation are currently below the lower bound of
the target range, with headline averaging 0.3% year-over-year and core averaging 0.8% yearover-year in the third quarter of 2016. Headline inflation moved out of a persistent bout of
deflation—driven largely by the drag from energy prices—in April 2016. In this context,
monetary policy remains accommodative, with the policy rate at 1.50%, just 25 basis points
above the record lows set during the 2008–2009 global financial crisis.
Looking ahead, inflationary pressures are likely to remain subdued and monetary policy
should remain accommodative. The BoT expects inflation to rise gradually in 2017, with
headline inflation rising to 2.0% and core inflation rising modestly to 1.0%. Meanwhile,
economic growth in 2017 is expected to remain steady at 3.2%, the same as in 2016, and
only modestly better than the 2.8% posted in 2015. The composition of growth is expected
to shift toward net exports, while domestic demand is expected to slow mildly as authorities
reduce fiscal stimulus. In this context, we expect policy rates to remain on hold in 2017.
Exchange Rate Policy
The Thai baht (THB) is a convertible currency that has traded in a managed floating
exchange-rate regime since July 1997. Under this regime, the BoT does not target a level
for the exchange rate, but intervenes in both the spot and/or forward markets onshore and
offshore to smooth excess volatility in a manner consistent with the inflation-targeting framework. The BoT also seeks to maintain national competitiveness, as measured through the
Nominal Effective Exchange Rate (NEER), which comprises currencies of important trading
partners and not just the US dollar.
Balance of Payments: Thailand’s current account balance should reach a surplus of US$40
billion in 2016, or 10% of GDP, versus an 8% of GDP surplus in 2015. This is mainly due
to the declining cost of fuel imports. Looking toward 2017, the current-account surplus
should begin to shrink as energy prices recover, while exports remain subdued. The BoT
forecasts a current-account surplus of US$32 billion in 2017 or about 8% of GDP. Persistent
export weakness is driven by soft global demand for manufactured goods. Manufactured
goods represent 88% of total exports receipts, while the United States, Japan, China, and
European Union represent 50% of export destinations. In this context, the currency should
remain broadly stable as the NEER is in line with its five-year average, which seems to be the
implicit target of the BoT. Meanwhile, the THB real effective exchange rate is currently in
line with its 10-year historical average, reinforcing our expectation of exchange-rate stability.
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Lazard Emerging Markets Debt
Inflation
USD/THB
10
50
8
45
6
4
40
2
35
0
-2
30
-4
-6
2000
2008
Inflation
2016
Reference Rate
As of December 2016
Source: Bloomberg
REER
115
106
97
88
79
70
2000
2008
2016
REER
Median since Dec 2000
Median last 5 yrs
Median last 10 yrs
As of December 2016
Source: JP Morgan, Lazard
110
25
2000
2008
2016
Thailand
Country Background
Size
513,120 KM2 (51st)
Capital
Bangkok
Population
68.2 Million
Ethnic Groups
Thai 96%, Burmese 2%, Other 1%
Religion
Buddhist (official) 93.6%, Muslim 4.9%, Christian 1.2%
Median Age
37.2 Years
Literacy Rate
96.7%
Independence
1238 (Traditional Founding Date; Never Colonized)
Political System
Constitutional Monarchy
Executive Branch
King Maha Vajiralongtorn, Prime Minister General Prayuh Chanocha
Legislative Election
2017
Legislative Branch
N/A Pending Elections
Economy
Agriculture 9.1%, Industry 35.7%, Service 55.1%
Labor Force
Agriculture 32.2%, Services 16.7%, Industry 51.1%
Merchandise Exports
Automobiles and Parts, Computers and Parts, Jewelry and
Precious Stones, Polymers of Ethylene in Primary Forms
Export Partners
United States 11.2%, China 11.1%, Japan 9.4%, Hong
Kong 5.5%, Malaysia 4.8%, Australia 4.6%, Vietnam
4.2%, Singapore 4.1%
Currency
Baht (THB)
As of November 2016
Source: CIA
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Lazard Emerging Markets Debt
Country Timeline
Financial turmoil
1997
Asian financial crisis: The baht falls sharply against the dollar, leading to bankruptcies and
unemployment. The IMF steps in. Chuan Leekpai becomes prime minister.
1998
Tens of thousands of migrant workers are sent back to their countries of origin. Chuan
involves the opposition in his government in order to push through economic reforms.
1999
Economy begins to pick up again. Thai media highlight high cost of drug treatments for Aids
and HIV. Thailand begins to put pressure on drugs companies to find ways to make the drugs
cheaper.
2001
January—New Thai Love Thai party wins elections after partial re-run of poll. Leader Thaksin
Shinawatra forms coalition government.
2001
June—Burma-Thailand border crossing, which was closed after clashes between the two
countries' troops in February, re-opens after Thaksin visits Burma.
2002
May—Burma closes border with Thailand again after Thai army fires shells into Burma during
battle between Burmese army and ethnic Shan rebels. Border reopens in October.
Temple row
2003
January—More than 500 Thai nationals are evacuated from Cambodia amid angry protests
after remarks attributed to by a Thai actress that Cambodia "stole" its Angokr Wat temple
complex from Thailand.
2003
February—Controversial crackdown on drugs starts; more than 2,000 suspects are killed. The
government blames many of the killings on criminal gangs; rights groups say extra-judicial
killings were encouraged by the authorities.
2004
January-March—Martial law is imposed in largely-Muslim south after more than 100 killed in
a wave of attacks blamed on Islamic militants.
2004
February—More than 100 Islamic militants die in coordinated attacks on police bases in the
south.
2004
October—85 Muslim protesters die, many from suffocation, while in army custody following
violence at a rally in the south. An enquiry concludes they were not killed deliberately.
Tsunami
2004
December—Thousands of people—both Thais and foreign tourists—are killed as when a
massive tsunami, triggered by an undersea earthquake off the coast of Sumatra, devastates
communities on the south-west coast, including the resort of Phuket.
2005
March—Thaksin Shinawatra begins a second term as PM after his party wins February's
elections by a landslide.
2005
July—As violent unrest continues in the south, Prime Minister Thaksin is given new powers
to counter suspected Muslim militants in the region. In November the death toll in violence
since January 2004 tops 1,000.
2005
October—Thailand redoubles efforts to fight bird flu as fresh outbreaks of the disease are
reported.
Coup
2006
April-May—Snap election called by the PM amid mass rallies against him is boycotted by the
opposition and is subsequently annulled, leaving a political vacuum. The PM takes a sevenweek break from politics.
2006
August—Prime Minister Thaksin Shinawatra accuses several army officers of plotting to kill
him after police find a car containing bomb-making materials near his house.
2006
19 September- Military leaders stage a bloodless coup while Prime Minister Thaksin
Shinawatra is at the UN General Assembly. Retired General Surayud Chulanont is appointed
as interim prime minister in October.
2007
January—Martial law is lifted in more than half of the country.
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Thailand
2007
April—First draft of a new constitution is approved by a committee appointed by the military
administration.
2007
May—Ousted PM Thaksin Shinawatra's Thai Rak Thai party is banned. Thousands of soldiers
are put on alert.
2007
August—Voters approve a new, military-drafted constitution in a referendum.
Democracy restored
2007
December—General elections mark the first major step towards a return to civilian rule. The
People Power Party (PPP), seen as the reincarnation of Thaksin's Thai Rak Thai (Thais Love
Thais) party, wins the most votes.
2008
February—Return to civilian rule. Samak Sundaravej of the Thaksin-linked People Power Party
(PPP) is sworn in as prime minister. Ousted premier Thaksin Shinawatra returns from exile.
2008
July—Pojaman Shinawatra, the wife of former prime minister Thaksin Shinawatra, is found
guilty of fraud and sentenced to three years in jail. She is granted bail pending an appeal.
2008
August—Thaksin flees to Britain with his family after failing to appear in court to face
corruption charges.
Unrest
2010
November—Thailand extradites Russian national Viktor Bout to the US on charges of arms
dealing, after months of legal wrangling. Russia says the move is a "glaring injustice" and
politically motivated.
2011
January—Tensions rise as Cambodia charges two Thai citizens with spying after arresting
them for crossing the disputed border.
2011
February—After an exchange of fire across the Thai-Cambodian border, the two countries
agree to allow Indonesian monitors access to the area to prevent further clashes.
2011
April—Eighteen people are left dead after border dispute over land near the ancient Preah
Vihear temple on the Thai-Cambodian sparks armed clashes.
Election sweep
2011
July—The pro-Thaksin Pheu Thai party wins a landslide victory in elections. Yingluck
Shinawatra—the sister of Mr Thaksin Shinawatra—becomes prime minister.
2011
October—The government introduces a rice subsidy scheme with the aim of ensuring that
farmers - who form the main part of Pheu Thai's social base in the rural north of Thailand receive a guaranteed price for their rice crop. The scheme causes government debt to soar,
and the resulting increase in the price of Thai rice causes the country to lose its rank as the
world's number one rice exporter.
2012
June—Anti-government yellow-shirts blockade parliament to prevent debate on proposed
reconciliation bill aimed at ending six-tear-old political tensions. Group fears that a proposed
amnesty would enable the return of ousted PM Thaksin Shinawatra.
2012
November—Police disperse 10,000-strong protest in Bangkok calling for overthrow of Prime
Minister Yingluck Shinawatra. New Pitak Siam (Protect Thailand) movement led by retired
Gen Boonlert Kaewprasit unites yellow-shirts and others who see the government as a
puppet of exiled former PM Thaksin Shinawatra.
2012
December—Former Prime Minister Abhisit Vejjajiva is charged with responsibility
for the death of a taxi driver shot by troops during anti-government protests in Bangkok in 2010.
Peace moves
2013
February—Government, Muslim separatists in south sign first-ever peace talks deal.
2013
April—Constitutional Court blocks moves by ruling Pheu Thai party to amend 2007 post-coup
constitution.
2013
June—Government cuts guaranteed price for rice, provoking an angry reaction from farmers
and protests in Bangkok. PM Yingluck Shinawatra reshuffles cabinet for fifth time, sacking commerce minister responsible for rice price subsidy cut and taking on defence portfolio herself.
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Lazard Emerging Markets Debt
2013
July—Government, Muslim separatists in south agree to Ramadan ceasefire.
2013
November—Tens of thousands of opposition supporters protest in Bangkok against
a proposed political amnesty bill that critics say would allow ousted leader Thaksin
Shinawatra—the brother of Prime Minister Yingluck Shinawatra—to return to Thailand without facing jail.
2013
December—In response to opposition pressure, PM Yingluck Shinawatra announces that
early elections will be held in February 2014 but rejects calls for her to step down in the meantime. Former prime minister Abhisit Vejjajiva charged with murder over 2010 crackdown
on demonstrators in which more than 90 people died. Mr Abhisit, leader of the opposition
Democrat Party, denies the charges and is granted bail. The opposition says that it will boycott the February elections.
2014
February—General elections go ahead but the Constitutional Court declares them invalid
because of disruption by the opposition.
2014
May—Constitutional Court orders Prime Minister Yingluck Shinawatra and several ministers
out of office over alleged irregularities in appointment of security adviser. Army seizes power
in coup.
2014
August—Coup leader General Prayuth Chan-ocha is made prime minister.
2014
November—Finance Minister Sommai Phasee says Thai elections unlikely until 2016.
Parliament bans the trade in babies born through surrogate pregnancies, following growing
public opposition to the practice.
2014
December—Crown Prince Vajiralongkorn revokes royally-assigned family name of his wife,
following the arrest of several of her relatives in a corruption case.
2015
March—Coup-appointed Prime Minister Prayuth Chan-ocha ends martial law, continues to
rule by executive order.
2015
May—Military government to hold referendum on new constitution in early 2016, delaying
move to restore democracy.Ex-Prime Minister Yingluck Shinawatra pleads not guilty at start
of trial on charges of negligence over rice subsidy scheme. She faces up to 10 years in prison
if found guilty.
2015
August—Terrorist bomb attack kills 20 people at Hindu Erawan shrine, Bangkok.
2016
August—Voters approve a new constitution giving the military continuing influence over the
country’s political life.
2016
October—King Bhumibol Adulyadej, the world’s longest reigning monarch, dies at the age of
88 after 70 years on the throne.
Source: BBC
Notes
1
2
3
4
5
As of December 2016.
As of December 2015. Source: Haver, IMF.
As of December 2015. Source: Haver, IMF.
As of December 2015. Source: Haver.
“J.P. Mrogan Local Markets Guide,” J.P. Morgan, September 2013; As of December 2014. Sources:
Haver, IMF.
6 As of December 2015. Source: Haver, IMF.
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Published on 24 February 2017.
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