Country risk

Country risk in Thailand is low to moderate. The OECD has a country credit grade of 3; comparable with the Philippines, India and Indonesia. This indicates a relatively low to moderate likelihood that Thailand will be unable and/or unwilling to meet its external debt obligations. That said, individual private and sub-sovereign debtors can and do default.

The World Bank’s ease of doing business gauge ranks Thailand 21st out of a possible 190 economies. That is significantly better than the average emerging and developing Asian rating of 95. But Thailand remains less competitive than neighbours Malaysia (ranked 12th) and Singapore (2nd) in part because of gaps in educational outcomes and labour skills shortages.

Risk of expropriation in Thailand is moderate to high. One example of expropriation in recent years is the Thai government’s ordering of an eight-month closure of the Australian owned Kingsgate Gold mine in Northern Thailand. According to the US investment climate statements, Thai laws provide guarantees regarding protection from expropriation without compensation and non-discrimination for some, but not all, investors. Thailand allows the government to carry out expropriation for the purpose of promoting public interest, with reasonable compensation being offered to the expropriated private party. 

Political risk is moderate. The elected administration in 2019 has, more recently, faced disruptions through cabinet reshuffles and delays in enacting the budget. Some political uncertainty remains, given a large and diverse mix of political parties in the ruling coalition and lingering tensions between the government and opposition parties. At the same time, student protests since July are demanding a new constitution, the dissolution of parliament, a halt to perceived intimidation of political dissidents, and reform of the monarchy. Domestic political stress and civil unrest could impinge on the effectiveness of policymaking, foreign investment and the economic recovery. Risk of political violence remains prominent because of Thailand’s long history of military coups.

Governance indicators are broadly stronger than most other emerging Asian economies, except for political stability/absence of violence and voice and accountability. Thailand has a demonstrated track record of transparent and predictable fiscal and monetary policies that have maintained economic and financial stability through political cycles.