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Thailand
Summary
Moody’s Baa1 / S&P BBB+ / Fitch BBB+1
Economy: Agriculture 12%, Industry 44%, Services 44%
Among Thailand’s key strengths are the size and diversification of its economy, the second largest in
the Association of Southeast Asian Nations (ASEAN) after Indonesia. The economy has proven its
resilience from major shocks in recent years, including the tsunami in Japan and the floods of 2011.
Credit risks are low in Thailand in part due to a public debt stock that is almost fully domestic and
widely owned by local financial entities. Despite setbacks in its external position, Thailand’s external
liquidity is still quite comfortable with foreign exchange reserves exceeding the entire stock of external
debt. The political stalemate and its impact on the economy represent the main negative for Thailand,
and the turmoil is likely to continue. Growth is expected to be slightly above 3% over the next few
years, in our view. At the same time, the fiscal position has deteriorated and public debt ratios, though
still moderate, are rising.
Economic Indicators
2011
2012
2013
2014
2015E
67.6
68.0
68.3
68.7
68.8
69.0
GDP per Capita (USD)
5,479
5,849
6,152
5,896
5,426
5,697
Nominal GDP (USD Billions)
Population (Millions)
2016F
370.6
397.5
420.2
404.8
373.5
393.0
Real GDP (%)
0.8
7.3
2.8
0.9
2.5
3.2
Year-end CPI (%)
3.5
3.6
1.7
0.6
-0.3
2.3
Fiscal Balance (% of GDP)
0.0
-0.9
0.4
-0.8
-1.1
-1.4
Interest (% of Revenues)
4.0
4.0
3.4
3.4
3.3
3.3
FC Debt/Public Debt (%)
1.5
1.3
1.9
1.9
2.0
2.0
39.1
41.9
42.2
43.5
43.5
42.6
Government Debt (% of GDP)
Government Debt (% of Revenue)
184.2
206.5
189.8
205.2
204.2
200.6
Current Account (% of GDP)
2.4
-0.4
-0.9
3.3
6.2
5.4
FDI (% of GDP)
-1.3
-0.4
0.9
-0.1
0.3
0.6
External Debt (% of GDP)
23.1
24.3
28.5
34.6
39.8
36.1
Foreign Reserves/External Debt (%) 204.5
188.0
139.7
112.1
104.2
112.8
Foreign Reserves (Mo. of imports)
29.6
27.4
25.6
21.4
21.6
21.9
Foreign Reserves (% of GDP)
42.4
45.6
45.2
42.6
37.4
35.1
As of December 2015
Forecasted or estimated results do not represent a promise or guarantee of future results and are subject
to change.
Sources: Haver, IMF, Lazard
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Lazard Emerging Markets Debt
Rating History
Following is a history of the country’s foreign and local currency ratings by the major
agencies dating back to 2000 demonstrating the country’s stable fundamentals. We have
also included the local yield history against the JP Morgan Global Bond Index – Emerging
Markets. There is no hard currency external debt spread available for Thailand.
Rating History
Hard Currency
Local Currency
A-
A+
BBB+
A
BBB
A-
BBB-
BBB+
BB+
BBB
BB
2000
2007
Moody’s
2015
S&P
BBB-
2000
2007
Moody’s
Fitch
2015
S&P
Fitch
As of December 2015
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
10
8
6
NOT AVAILABLE
4
2
2000
Thailand
2007
2015
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
Diversified, Open, Large Economy
With a GDP of $375 billion, Thailand is the second largest economy in ASEAN after
Indonesia.2 The mainstays 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 which have included
the impact on its manufacturing sector from the tsunami in Japan, a major trading partner
particularly for cars and electronics, and major floods in 2011. Thailand’s economy is very
open with trade accounting for over 150% of GDP, underscoring a highly competitive
manufacturing sector which is well integrated in supply chains.4 Exports have suffered some
setbacks recently given slower growth in key trading partners, including the European Union
(EU) and China.
Low Rollover Risk for Public Debt
One of Thailand’s key credit strengths is the lack of currency risk in its government balance
sheet given the combined external debt of the central government and central bank represents
only 5.6% of GDP.5 Further, given Thailand’s deep financial system—bank assets were
136% of GDP with the total financial system assets over 200% of GDP at the end of 2013—
most of the public debt is held locally among insurance companies, pension funds, banks,
and the publicly-held government pension fund and social security office.6 Non-residents
held 16% of the total as of June 2014, down from 18% at the end of 2013.7 The country’s
relatively large national savings provides an important buffer.
Strong External Position
At the end of 2015, Thailand’s external debt was 33% of GDP, but it has foreign exchange
(FX) reserves of $158 billion (42% of GDP) which provides 127% of coverage of the total
external debt.8 The current account surplus continued to surge in 2015 on the back of low
oil prices and should reach $30 billion compared to $15billion in 2014, a hefty ratio of 8%
of GDP. The financial account has offset some of the current account surplus, with foreign
direct investment (FDI) and portfolio outflows surpassing 4.5% of GDP, while errors and
omissions still account for 3.3% of GDP.
Weaknesses
Volatile Politics
Political risk has worsened since the September 2006 coup which removed populist Prime
Minister Thaksin 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 students and those who are opposed to the urban elites and the
military that they see as forces that disproportionally control power are also among them. The
yellow shirts typically represent the urban middle class and the ultra nationalists. They see
Mr. Thaksin’s power as based on widespread corruption and populist policies and, therefore,
a threat to democracy.
In December 2007, the anti-Thaksin coalition was in power until new elections were won
in a landslide by Mr. Thaksin’s sister, Yingluck Shinawatra, in July 2011. The Shinawatra
government was removed by a military coup on May 22, 2014. The military established a
junta (National Council for Peace and Order - NCPO) that has ruled the country since then.
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An interim constitution was written and the newly established national legislature elected
General Prayuth as a new prime minister.
A new constitution is expected to be submitted to a popular referendum by the middle of
2016. If approved, general elections should happen by mid-2017 with Thailand returning to
civilian rule after three years of rule under a military junta.
Slowdown in Growth
Despite solid structural fundamentals and an average growth rate of 4.4% in the decade to
2012, Thailand’s economy is slowing due to a combination of softer external and domestic
conditions. Full year real GDP growth slowed to 0.9% in 2014 and should post a small
rebound in 2015 at 2.7%. Domestic absorption rebounded across the board, but the government investment led the recovery in 2015. The outlook for 2016 is for growth above 3%
with some recovery in private investment. However, the years of 5% GDP growth seem
behind us and political stability is necessary for Thailand to recoup its potential.
Fiscal and Public Debt Deterioration
Thailand has historically maintained a tight fiscal policy, typically running small deficits. This
has recently been compromised by the fiscal stimulus in response to various shocks and the
policy directives to boost infrastructure. As a result, fiscal deficits widened, with fiscal year
2014 at 2.8% of GDP for the general government, and likely stable at 2.7% in 2015.9 The
IMF projects that at the broader public sector level, which also includes off-budget investment projects undertaken by other public entities, deficits would have widened to 4.2% of
GDP by the end of fiscal year 2014, up from 1.5% of GDP in fiscal year 2011.10 As a result,
public debt including guarantees to public entities has increased, reaching 46% of GDP at
the end of 2013 up from 41% in 2011 and 37% in 2007.11 The government is planning
major, off-budget infrastructure projects over the next six years, estimated to cost about 20%
of 2013 GDP. This is also likely to pressure public debt ratios. For now, execution of these
projects, as well as public expenditures in general, are being slowed down by the political
crisis, but in the medium term, Thailand could see further rise in public indebtedness. The
government intends to balance the fiscal accounts by 2017 and to keep public debt below
50% of GDP.12
Monetary and Exchange Rate Policy
Inflation/Monetary Policy
The Bank of Thailand (BoT) started its operations in 1942. The Monetary Policy Committee
(MPC) is one of the main committees of the Bank of Thailand and is responsible for setting
the monetary policy stance. The committee is comprised 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 setting the monetary policy and for the
exchange rate management.
The BoT has been conducting monetary policy under an inflation target regime since the
2000. The central bank targets 2.5% for headline CPI with a tolerance range of ±1.5% since
2015. The committee has argued that shifting into headline targeting would improve transparency and hence communication with the public.
Over the past 10 years the 12 month headline inflation has been 2.6% on average, while core
(ex-raw food and energy) has been 1.5% on average. Over the past ten years, core inflation
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Thailand
changes year-over-year have never breached the 4% ceiling, and reached a peak at 3.75% in
the 3Q 2008 in response to the shock in commodity prices. Note that headline inflation has
a higher average and also higher volatility than core inflation. The large proportion of food
(48%) and transport (25%) in the headline CPI explains the persistency of the deviation.
In line with commodity price trends, headline CPI is currently lower than core inflation and
at historical lows for the series, excluding the global financial crisis. The YoY measure for food
inflation is currently at 2.05% versus a 6.4% average for the past 10 years, and transportation
inflation is at -6.5% versus 1.35% average.
Inflation
THB/USD
50
10
8
45
6
4
40
2
35
0
-2
30
-4
-6
2000
Inflation
2007
2015
25
2000
2007
2015
Reference Rate
As of December 2015
Source: Bloomberg
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Exchange Rate Policy
The Thai baht (THB) is a convertible currency that has traded in a managed-float exchange
rate regime since July 1997. Under this regime, the BoT does not target a level for the
exchange rate, but is ready to intervene in case of excess volatility in a manner that is
consistent with the inflation target 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 Payment: Thailand’s 12-month current account balance should reach a surplus of
$33 billion in 2015, or 9% of GDP, versus a 3% surplus in 2014. The windfall came mostly
from low fuel prices as the decline in fuel import costs represented 73% of the improvement
in the trade balance. Exports were down by $10 billion in the period as global demand for
manufactured goods remained subdued. Manufactured goods represent 88% of total exports
receipts, while the United States, Japan, China, and European Unions represent 50% of
the export destination. The outlook for 2016 is for another sizeable surplus barring a major
rebound in fuel prices.
The THB real effective exchange rate (REER) is currently 1.8% above versus its 10-year
historical average. Adjusted by its volatility, that gap represents 0.4 standard deviations from
the average.
REER
115
106
97
88
79
70
2000
2007
2015
REER
Median since Dec 2000
Median last 5 yrs
Median last 10 yrs
As of December 2015
Source: JP Morgan, Lazard
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Thailand
Country Background
Size
513,120 KM2 (51st)
Capital
Bangkok
Population
68.0 Million
Ethnic Groups
Thai 96%, Burmese 2%, Other 1%
Religion
Buddhist (official) 93.6%, Muslim 4.9%, Christian 1.2%
Median Age
36.7 Years
Literacy Rate
96.7%
Independence
1238 (Traditional Founding Date; Never Colonized)
Political System
Constitutional Monarchy
Executive Branch
King Bhumibol, Prime Minister General Prayut Chan-ocha
Legislative Election
2017
Legislative Branch
N/A Pending Elections
Economy
Agriculture 10.5%, Industry 36.8%, Service 52.7%
Labor Force
Agriculture 32.2%, Services 16.7%, Industry 51.1%
Merchandise Exports
Automobiles and Parts, Computer and Parts, Jewelry and
Precious Stones, Polymers of Ethylene in Primary Forms
Export Partners
China 11%, US 10.5%, Japan 9.6%, Malaysia 5.6%,
Hong Kong 5.5%
Currency
Baht (THB)
As of December 2015
Source: CIA
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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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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.
Source: BBC
Notes
1 As of December 2015.
2 As of December 2015. Source: Haver, IMF.
3 As of December 2015. Source: Haver, IMF.
4 As of December 2015. Source: Haver.
5 As of December 2015. Source: Haver.
6 “J.P. Mrogan Local Markets Guide,” J.P. Morgan, September 2013; As of December 2014. Sources: Haver, IMF.
7 As of March 2014. Source: Haver.
8 As of December 2015. Source: Haver, IMF.
9 As of December 2015, Sources: Haver, IMF.
10“Thailand: 2013 Article IV Consultation,” IMF Country Report No.13/323, November 2013, http://www.imf.
org/external/pubs/ft/scr/2013/cr13323.pdf.
11As of December 2014, Sources: Haver, IMF, and Lazard.
12As of December 2015, Sources: Haver, IMF.
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Published on 13 January 2016.
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