Bangkok--16 Apr--Standard & Poor's
--Thailand's net external creditor position, prudent fiscal management, and relatively light net government indebtedness are key support for sovereign creditworthiness.
--Standard & Poor's Ratings Services affirmed its 'BBB+/A-2' foreign currency and 'A-/A-2' local currency sovereign credit ratings on Thailand.
--The negative outlook reflects the significant risk of an escalation in political uncertainties damaging credit support for the government.
Standard & Poor's Ratings Services today affirmed its 'BBB+' foreign currency and 'A-' local currency long-term sovereign credit ratings on the Kingdom of Thailand. The outlook remains negative. At the same time, Standard & Poor's affirmed the 'A-2' short-term credit ratings on Thailand. The transfer and convertibility (T&C) assessment on Thailand remains at 'A'. Standard & Poor's also affirmed the 'axAA-/axA-1' ASEAN scale rating on Thailand.
Thailand's net external creditor position, prudent fiscal management, and relatively light net government indebtedness are key support for sovereign creditworthiness. Thailand's foreign-exchange reserves are projected to exceed US$140 billion by the end of 2010. This exceeds the forecast for external debt of US$60 billion by a large margin, offering a significant buffer against economic and financial shocks.
"Despite the projected general government deficit in 2010, we expect surpluses to return in 2011," said Standard & Poor's credit analyst Kim Eng Tan. "The general government surpluses generated in recent years have kept net general government debt to less than 20% of GDP at the end of 2009--significantly lower than the median level for 'BBB' sovereigns."
Political uncertainties have emerged as a key credit weakness. Since 2006, the country has seen a number of abrupt changes of government. This has distracted from long-term policy planning and implementation. Street protests in the capital of Bangkok have also become common, sometimes leading to violent clashes with security personnel.
"We consider the risk of a substantial deterioration of the situation into widespread violence to be modest," Mr. Tan added. "We also do not expect the near-term negative impact on the economy to cause sudden deteriorations in the government's credit metrics."
However, these events have negatively affected investor confidence and capital spending in recent years has been weak. In 2009, a court judgment suspending numerous industrial projects in the Ma Ta Phut area had also caused significant investor concerns. The resulting negative impact on the investment climate could adversely affect medium-term growth prospects.
The negative outlook on the sovereign ratings reflects the significant risk of an escalation in political uncertainties damaging credit support for the government. Indications of a serious and sustained worsening of fiscal and economic indicators resulting from such a development could trigger a downgrade of the sovereign credit ratings. 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.
RELATED CRITERIA AND RESEARCH
Sovereign Credit Ratings: A Primer, published May 29, 2008.
Complete ratings information is available to RatingsDirect on the Global Credit Portal subscribers at www.globalcreditportal.com and 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. Use the Ratings search box located in the left column.
Media Contact:
David Wargin, New York (1) 212.438.1579,
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Analyst Contacts:
KimEng Tan, Singapore (65) 6239-6350
Takahira Ogawa, Singapore (65) 6239-6342
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