Bangkok--23 Jun--Standard & Poor's
-- Thailand's US$2 billion euro commercial paper program assigned 'A-2' foreign currency issue rating.
-- Thailand's net external creditor position, prudent fiscal management, and relatively light net government indebtedness support the sovereign and issue ratings.
Standard & Poor's Ratings Services said today that it had assigned its 'A-2' foreign currency issue rating to the US$2 billion euro commercial paper program of Thailand (foreign currency: BBB+/Negative/A-2; local currency: A-/Negative/A-2).
"The sovereign credit ratings on Thailand are supported by the country's net external creditor position, its prudent fiscal management, and relatively light net government indebtedness," said Standard & Poor's credit analyst Kim Eng Tan. "On the other hand, heightened political risks and banking sector non-performing assets are the main weaknesses of the government's creditworthiness."
A strong external balance sheet, which is reinforced by consistent current account surpluses, is a key supporting factor for the sovereign credit ratings on Thailand. Thailand's external financial assets outsized external debt by 33% of current account receipts at the end 2008. Fiscal discipline also underpins Thailand's sovereign creditworthiness. Successive Thai governments have shown themselves to be prudent in fiscal matters.
Heightened political tensions continue to undermine support for the Thai sovereign ratings. It remains unclear if deep divisions within the Thai establishment can be resolved within the political framework. In our view, the heightened risk of widespread violence following the occupation of the two important airports by anti-government protestors has lessened the possibility of a near-term resumption of sustainable political stability. If the recovery in capital spending stalls as a result, economic growth in the next few years could fall from levels of the recent past.
The negative outlook on the sovereign ratings reflects our expectations that recent events have damaged medium-term economic growth prospects in Thailand.
We may lower the sovereign ratings if Thailand's economic performance weakens sharply, causing government finance to deteriorate seriously or banks' asset quality to worsen markedly. We may revise the negative outlook to stable if political divisions in the country are resolved peacefully and in a sustained manner, which eases perceptions of country risks and allows a rebound in investment.
RELATED RESEARCH
This article is based in part on the following criteria article: "Sovereign Credit Ratings: A Primer," published on RatingsDirect on May 28, 2008.
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.
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Takahira Ogawa, Singapore (65) 6239.6342
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