Bangkok--16 Apr--Standard & Poor's
Standard & Poor's Ratings Services today lowered its local currency sovereign credit rating on the Kingdom of Thailand to 'A-/A-2' from 'A/A-1'. The outlook is negative. At the same time, it affirmed its 'BBB+/A-2' foreign currency rating on the sovereign with a negative outlook.
"The rating downgrade reflects the latest deterioration in the Thai political situation, which has diminished further the prospects of a near-term return to stability," said Standard & Poor's credit analyst Kim Eng Tan. The latest large-scale protests against the Democrat Party-led government continue the increasingly confrontational nature of such rallies.
The likelihood of further economic disruptions related to these protests has risen as a result. They also demonstrate that political tensions in Thailand will remain high under governments led by either of the two main political factions.
"We believe that investor confidence has been damaged significantly as a result of the latest developments while, in the near term, inbound tourism will also be affected negatively," Mr. Tan said.
A net external creditor position, prudent fiscal management, and relatively light net government indebtedness remain the key support for sovereign creditworthiness in Thailand. We project Thailand's foreign exchange reserves to exceed US$130 billion by the end of 2009. This exceeds our forecast external debt of US$70 billion by a large margin. General government surpluses generated in recent years have also lowered net general government debt to below 18% of GDP at the end of 2008.
Political uncertainties have emerged as an important credit weakness in recent years. Since 2006, a number of changes to the government have taken place. These changes have often been abrupt and, recently, have been followed by street protests opposing the leading political party. Since late 2008, protests have also begun to cause significant economic disruptions. Thailand has been considered an attractive investment destination in recent years, but investors are now likely to factor in the negative implications of political uncertainty in making their decisions.
The negative outlook on the sovereign ratings reflects the significant potential of further deterioration in credit support for the sovereign, Mr. Tan said. Indications of a serious and sustained worsening of fiscal and economic indicators could trigger a downgrade of the sovereign credit ratings.
On the other hand, the outlook could revert to stable if investor confidence sees a strong revival, likely on indications that the Thai domestic political situation is returning to a sustained equilibrium, he noted.
Complete ratings information is available to RatingsDirect subscribers at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Find a Rating.
Media Contact:
David Wargin, New York (1) 212.438.1579, [email protected]
Analyst Contacts:
KimEng Tan, Singapore (65) 6239.6350
Takahira Ogawa, Singapore (65) 6239.6342