Fitch sees Thailand as a global economic bright spot

Thailand’s economy is one of the few in which growth will accelerate next year thanks to a tourism recovery, a healthy banking sector and strong external finances, according to global ratings agency Fitch.

The forecast is remarkable considering the gloomy global outlook. The world’s economy is facing severe headwinds as the year winds down, and the prognosis for 2023 will remain challenging, said James McCormack, managing director at Fitch Ratings. The agency believes much of the Eurozone will experience a recession by the end of this year, and the United States will cope with a mild recession in 2023.

Fitch noted that as a net oil importer, Thailand is coping with a terms-of-trade shock that, coupled with post-pandemic struggles in its tourism sector, has produced its first current account deficit in many years. Nonetheless, Fitch said, Thailand’s external finances are relatively strong, and the agency is confident the Kingdom will be one of the few economies in which growth will accelerate next year.

The Thai banking sector will register steadily improving earnings, driven by the economic recovery, according to Tania Gold, head of South and Southeast Asia Banks Ratings at Fitch. Thai banks have amassed loan-loss reserves and capital buffers, both of which are rating strengths, she added.

Fitch expects that earnings will also improve and surpass pre-pandemic levels next year in several sectors, including food and retail, telecoms, and cement and building materials. However, the petrochemical and utilities sectors will face tougher times because of high oil prices and energy costs that will hinder earnings improvement.