Bangkok--25 Oct--Fitch Ratings
Fitch Ratings today affirmed the Kingdom of Thailand's 'BBB+' Long-term foreign currency Issuer Default rating ("IDR") and 'A' Long-term local currency IDR and removed them from Rating Watch Negative on which they were placed on 19 September 2006. The Outlook on the ratings is now Stable. At the same time, the agency also affirmed Thailand's 'F2' Short-term IDR. The Country Ceiling is 'A-' (A minus).
The rating affirmations come on the back of the swift resumption of political stability following the military coup on 19 September 2006 as well as continued strength in Thailand's key credit indicators (and their superiority relative to the 'BBB' median) seen since Fitch's annual rating review in April 2006.
Since 19 September 2006, the coup leaders have closely followed their proposed agenda to appoint and organise an interim government and legislature. Furthermore, the overall political situation has quickly stabilised though Fitch notes that the Council for National Security has broad powers as stated in the interim constitution and martial law has not yet been lifted. Moreover, uncertainty still surrounds promulgation of a new constitution as well as the timing and results of a general election to restore democratic leadership. The interim government must also deal with the insurgency in the south of the country. Looking forward, Fitch believes that the coming 12 to 24 months will be critical in setting the stage for Thailand's long-term political development.
Thailand's external financial position has continued to improve. In particular, the current account surplus of USD1.6 billion in the first eight months of 2006 was unexpectedly strong compared against the deficit of USD5.4bn in the same period of 2005. The country's international reserves continued to increase and reached USD60.9bn as of 6 October 2006, better than the 'BBB' median in terms of short-term external debt, broad money and months of current external payments. Owing to its rising international reserves, Thailand maintains its strong net external creditor status, especially for the public sector. In addition, capital flight has not been significant with both the stock market and exchange rate between THB and USD recovering since the coup.
Thailand's key debt ratios have also remained at lower levels relative to the 'BBB' median. According to the agency's calculations, general government debt fell to 28.8% of GDP (lower than the expected 'BBB' median of 34.4%) at end-August 2006 from 31.9% at end-September 2005. Although the gross external debt in GDP terms increased slightly to 29.8% at end-Q206, it was still far lower than the expected 'BBB' median of 39.1% in 2006. Fitch believes that the planned budget deficits would not significantly affect these debt ratios in the medium term.
Owing to the expected slowdown in H206, Thailand's economic growth in 2006 is expected to be 4.3%, unchanged from Fitch's pre-coup forecast. Fitch also maintains its 2007 economic growth forecast at 4.6% for Thailand owing to accelerated government spending, stable interest rates and moderate price inflation. Fitch expects Thailand's economy to exhibit more balanced growth once consumer confidence and investor sentiment are restored. Growth momentum from the external sector, however, is likely to moderate given the expected global economic slowdown.
A Fitch Special Report entitled "Thailand After The Coup" will be available shortly to subscribers at www.fitchratings.com .
Contact: Vincent Ho, Hong Kong, +852 2263 9921/ [email protected] ; James McCormack, Hong Kong, +852 2263 9925/ [email protected]
Media Relations: Ching-Yuen Lock, Singapore, Tel: +65 6238 7301; Sylvia McKaige, Singapore, Tel: +65 6336 0095.
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