Thai Sovereign's Prospects Stabilising; Banks Retain Adequate Buffers

The annual Fitch on Thailand conference held on Wednesday examined global risks and the regional sovereign and banking outlook, while marking 25 years of Fitch Ratings Thailand and 30 years of Fitch's coverage of the country. These milestones also reflect the development of Thailand's debt capital markets and the role of independent credit opinions in supporting transparency, investor protection and market development.

The conference started with opening remarks by Dr Prasarn Trairatvorakul, former Secretary General of the Thai Securities and Exchange Commission, former Governor of the Bank of Thailand and current Chairman of the Thai Bond Market Association, and continued with a keynote address by Win Promphaet, Executive Chairman of Kasikorn Asset Management, covering the investment outlook for Thai and global markets.

Thomas Rookmaaker, Head of APAC Sovereigns at Fitch Ratings in Hong Kong, outlined global risks and the outlook for Asian economies, including Thailand. Fitch expects world growth to hold up well at 2.6% in 2026, slightly down from 2.7% last year, as artificial intelligence capex is showing no signs of slowing, offsetting downside pressures from the global energy shock. Strong IT-related exports support Asia's resilient growth, including in China, although domestic demand there remains weak with falling fixed asset investment and household deleveraging. Asian sovereigns face rising bond yields, however, especially the larger emerging economies, such as Indonesia and the Philippines.

Fitch's recent Outlook revision on Thailand's 'BBB+' rating to Stable, from Negative, reflects the agency's increased confidence in a broadly stabilising government debt/GDP ratio over the medium term, even though the government has stepped up spending in 2026 in response to the energy shock from the Iran war. Thailand's economy continues to face growth challenges, but is holding up better than Fitch expected, while deflationary pressures have receded, and policy predictability has improved following general elections last February.

The final presentation was on the banking sector outlook by Parson Singha, Senior Director, Financial Institutions at Fitch Ratings (Thailand). He told the conference that Thai banks have reduced their risk appetite through slower loan growth and changes in their loan mix. Asset quality risks remain high, and Thai nonperforming loans are likely to remain elevated relative to regional peers. Nevertheless, profitability is resilient despite the weak environment, and capital buffers should continue to provide some protection against downside risks.

In his closing remarks, Vincent Milton, Managing Director, Fitch Ratings (Thailand), said: "Fitch Thailand has supported the development of Thailand's debt capital markets by promoting transparency, governance and financial discipline in line with international credit standards. Greater transparency, including the use of at least two ratings in line with best practice in most countries, could strengthen market confidence and functioning."