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Published on September 4, 2007

Fitch Ratings, while opining that Thailand is among "the most vulnerable countries in Asia" to a decline in global economic growth, said yesterday the Kingdom's rating could be upgraded if the election really promises political stability.

Fitch announced that Thailand's credit rating had remained unchanged but said it would monitor the new government's policy on public financing as a key factor for future upgrading.

The ratings agency has maintained Thailand's BBB+ rating following steady fundamentals while considering external factors.

To upgrade the country's rating, James McCormack, senior director and head of Asia Sovereigns of Fitch Ratings Hong Kong, said it would have to wait and see the new government's policy towards public finance, government spending and infrastructure financial planning.

He said a return to a more stable political environment was critical to ensuring economic recovery, given several external factors that hurt the economy.

"The growth of domestic demand is extremely low and net trade is largely responsible for headline GDP growth. In this context, Thailand is among the most vulnerable countries in Asia to a reduction in global economic growth," McCormack said.

However, Thailand's sovereign creditworthiness remains sound and there is no immediate pressure on its sovereign ratings, he said.

McCormack commented on the Bank of Thailand's 30-per cent withholding tax measure announced on December 18 last year, saying that from the rating agencies' point of view, the measure did not favour the market. However, McCormack was more concerned about policy uncertainty.

"The introduction and then the removal of the measure resulted in a policy blunder. Also, the revision and amendments of the Foreign Business Act increased the uncertainty as it has taken too much time to finalise a conclusion," said McCormack at the annual seminar held by Fitch Ratings.

Meanwhile, Siam Commercial Bank has dramatically cut its lending growth target for this year to control asset quality while businessmen are still cautious about the country's prospects.

Yokporn Tantisawetrat, senior executive vice president and chief financial officer, said the bank had cut its lending growth forecast from more than 20 per cent to 13-15 per cent.

"We have to make sure that we sacrifice growth for better quality [of assets]," Yokporn said yesterday.

Amid the economic slowdown, Yokporn said his bank was concerned about asset quality. As a result, the bank has tightened credit standards and credit policy, while it has put some industries - particularly in the export sector - on a watch list.

According to Yokporn, the increase in non-performing loans is "not a frightening figure" and the bank needs to set provisions as usual.

However, the export sector has been hit hard, particularly sectors with high local content such as agricultural goods, while some listed export companies have recorded losses.

Anon Sirisaengtaksin, senior executive vice president of PTT's corporate strategy and development, said the company's key concern was short-term uncertainty affecting long-term growth.

"Although the election date is specified, uncertainty lies ahead. Things are clear at one step, but we will have to closely monitor what happens after the general election. The government's priorities are to stimulate domestic demand and accelerate government spending," Anon said.

"For the longer term, corporate firms will have to be prepared to face competition from other countries. We need to know that the government supports and encourages domestic players to invest overseas."

Jiwamol Kanoksilp,

Piyarat Setthasiriphaiboon

 The Nation