Bangkok--17 Apr--Moody's Investors
Moody's Investors Service says the outlook for Thailand's Baa1 local and foreign government bond ratings is stable.
The ratings are based on moderate levels of economic and institutional strength, a high degree of government financial strength, and a low-to-moderate susceptibility to event risk.
Thailand's relatively large size and the diversification of its economy is balanced against per capita income that is lower than peers. The floods that persisted throughout the second half of 2011 represented a mere cyclical shock, rather than a structural one, and a rapid V-shaped recovery is currently under way. The country is bulking up its defenses against flooding in the future, while the government has actively sought to restore confidence in its ability to manage such crises in order to retain onshore investments.
Measures of the government's effectiveness have slipped in recent years, but the relatively high quality of core economic institutions has been maintained and has enabled the country to manage recent shocks.
While fiscal discipline has been tested by successive crises, Thailand's fiscal and debt ratios have weakened somewhat from their strong positions before the global financial crisis, but they continue to be in line with rating peers. Thailand has a robust external payments position which has enabled favorable financing conditions for the government and the economy at large.
Thailand's low-to-moderate susceptibility to event risk balances prominent political risks against resilient economic and financial fundamentals. Over the medium-term, domestic political instability will continue to have only limited impact on economic growth.
On the other hand, as Thailand is among the most open economies in the Baa range, it is more susceptible to external spillovers, such as those from the euro area crisis, than its rating peers.
The Thai banking system is also well positioned to weather potential disruptions to the supply of credit stemming from volatility in the global financial market.
Moody's report provides an update to the markets and is not a rating action.
The report is entitled Thailand. It can be found at
http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_141043