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March 6 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Thailand's Long-Term Foreign and Local Currency Issuer Default
Ratings (IDRs) at 'BBB+' and 'A-' respectively. The issue ratings on Thailand's senior unsecured
foreign and local currency bonds are also affirmed at 'BBB+' and 'A-'. The Outlooks on the
Long-Term IDRs are Stable. The Country Ceiling is affirmed at 'A-' and the
Short-Term Foreign Currency IDR at 'F2'.
KEY RATING DRIVERS
The affirmation and Stable Outlook reflect the following factors:
- Thailand has a strong external position and a credible monetary policy
framework, while key public finance ratios still compare well with peers. These
strengths have helped buffer the economy against turbulence associated with the
tapering of stimulus from the US Federal Reserve and against heightened domestic
political tension, which re-emerged in early November 2013.
- However, the near term political outlook remains uncertain. Prolonged and more
intense political tension could risk protracted economic weakness and erosion of
market confidence, which could ultimately put pressure on sovereign
- Thailand proved relatively robust to global emerging-market turbulence in
2013. However, domestic political uncertainty is dragging on Thailand's economy,
particularly on consumer and business confidence. Fitch forecasts Thailand's
real GDP to grow 2.5% and 3.7% in 2014 and 2015 respectively, compared with a
2.9% rise in 2013. Thailand's average growth of 3% for the five years to 2013
has dropped marginally below the medians for peers in the 'BBB' and 'A' rating
categories of 3.2% and 3.3% respectively. Diminishing growth and investment
could ultimately erode the credit profile. Conversely, measures to raise the
economy's growth potential could strengthen the credit profile.
- Thailand's public finances remain sound for the most part. General government
debt-to-GDP ratio stood at 31.9% at end-September 2013, significantly lower than
the 'BBB' and 'A' peer rating group medians of 40% and 53%. In the short term,
heightened political volatility limits the caretaker administration's ability to
implement public infrastructure plans, offsetting potentially lower tax
revenues, or commit to deeper changes to revenue and expenditure. However,
prolonged political drift could see the credit profile weaken if Thailand fails
to make progress with growth-enhancing reforms and policy measures.
- Fitch estimates that Thailand's net external creditor position stood at 38% of
GDP at end-2013, which is significantly stronger than both 'BBB' and 'A' peer
rating medians of -11% and 18%. The strong net external creditor position
reduces the country's reliance on foreign capital and provides Thailand a large
buffer during periods of either heightened political volatility or elevated
global risk version.
- Fitch believes that Thailand's banking sector is reasonably positioned to
weather the challenges of a more difficult operating environment. However,
Thailand's private credit-to-GDP ratio, which stood at 151.7% in 3Q13, is among
the highest in emerging markets and is viewed as a weakness for the sovereign
credit profile. This in turn increases the contingent liability risk the
sovereign could face if support for the banking sector needs to be provided in
the event that a large economic shock undermines private sector debt-servicing
The Outlook is Stable. Consequently, Fitch's sensitivity analysis does not
currently anticipate developments with a high likelihood of leading to a rating
Future developments that could individually or collectively, result in negative
rating action include:
- The absence of a functioning government, which is perceived to undermine the
economic policy making framework.
- More prolonged and/or intense political volatility, sufficient to undermine
medium-term economic prospects and financial instability.
- A sharp, sustained rise in Thailand's public debt, particularly rising
Future developments that could individually or collectively, result in positive
rating action include:
- Sustained economic growth - without emergence of imbalances - and a narrowing
of income divergence with 'A' rating category sovereigns, could see Thailand's
- A more rapid stabilisation of public debt ratios than Fitch currently expects.
Fitch assumes that there is no significant escalation in regional inter-state
tensions, including Thailand's border dispute with Cambodia and the on-going
territorial dispute between China and Japan.
Fitch assumes that the global economy will improve gradually over the forecast
period. The world's real GDP growth is projected to rise 2.9% and 3.2% in 2014
and 2015, compared with an estimate of 2.3% in 2013