Bangkok (VNA) – Fitch Ratings has warned that Thailand's economic recovery could be constrained by a global slowdownwhile the new coalition government's economic stimulus policies could lead tohigher government debt.

The credit rating agency said Thailand is notimmune to the weaker global backdrop, with merchandise exports contracting yearon year since October 2022 and tourist arrivals, while rising, remaining wellbelow pre-pandemic levels.

The recent formation of the multi-party coalition government couldencourage consensus-led policymaking, but wide-ranging views within thecoalition will complicate the process and may delay the budget for fiscal 2024,which begins on October 1, 2023, Fitch said.

It noted that fiscal consolidation is likely to beconstrained by parties' campaign pledges to raise social spending. This wouldsupport growth in the short term, though it could put upward pressure ongovernment debt relative to GDP unless the pick-up in growth is sustained.

Fitch expects the environment in Thailand over thenext two years to become more conducive for banks to grow profitably andgenerate capital despite the risk of further impairments on restructured loans. The agency held that major banks have an appetite to seek opportunities for growthdomestically in non-bank segments, as well as abroad./.