Thai Credit Ratings Face ‘Downgrade’ Risk, S&P Says
Thailand’s BBB+ credit rating may be lowered as the government struggles to quell escalating violence and the economy slows, Standard & Poor’s Ratings Services said.
“There is a significant chance of a ratings downgrade,” Kim Eng Tan, Singapore-based director of sovereign & international public finance ratings at S&P said today. “We have a negative outlook on the government ratings because of the continuing divide in Thai politics and the lack of obvious peaceful means of resolving it.”
Thai soldiers battled to restore order to Bangkok’s streets today as anti-government protesters defied an emergency decree and called for Prime Minister Abhisit Vejjajiva to step down. Soldiers fired tear gas to clear a key intersection of demonstrators, who blocked another road near the Foreign Ministry with public buses and burning tires.
About 47 civilians and 27 soldiers have been injured, the prime minister said in a televised address to the nation today. Abhisit, 44, was forced to cancel a summit of Asian leaders over the weekend after 1,000 protesters stormed the seaside venue.
“The biggest risk is widespread violence,” which may affect the economy, Tan said in an interview today. “Investors both foreign and local are more wary of planting investment in the country.”
Contracting Economy
Gross domestic product may shrink 2 percent this year, Tan said. Finance Minister Korn Chatikavanij has said Southeast Asia’s second-largest economy, which shrank “about 5 percent” in the first quarter, may contract more than 3 percent this year unless government spending is increased loan till payday.
Overseas sales, which make up 70 percent of the economy, have fallen for four straight months as demand for Asia’s electronics and other goods plunges. Political “uncertainties” may derail government spending, Thailand’s central bank said April 8, when it lowered its key interest rate to 1.25 percent.
Thailand plans to spend about 1.57 trillion baht ($44 billion) over three years, mainly on infrastructure projects, to help create jobs and boost economic activity. The government has also started implementing a 116.7 billion-baht stimulus package of training programs, cash handouts and tax breaks.
“Spending plans will definitely be slowed because the government simply has no time to push through all these projects they want to,” S&P’s Tan said. “Our ratings looking forward have to react to developments that may affect the future fiscal position.”
S&P revised the rating outlook on Thailand to negative from stable in December as political protests aimed at ousting the previous government led to a week-long shutdown of Bangkok’s international airport.
Moody’s Investors Service also lowered the outlook on Thailand’s foreign-currency debt in December to negative from stable. Moody rates Thailand’s overseas debt Baa1, six levels above the Philippines and five grades higher than Indonesia.
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