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"The rating downgrade reflects the latest deterioration in the Thai political situation, which has diminished further the prospects of a near-term return to stability," said Standard & Poor's credit analyst Kim Eng Tan. The latest large-scale protests against the Democrat Party-led government continue the increasingly confrontational nature of such rallies.

"We believe that investor confidence has been damaged significantly as a result of the latest developments while, in the near term, inbound tourism will also be affected negatively," Tan said.

 He added that 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, he noted.

"The downgrade of Thailand's ratings reflects the deterioration in sovereign creditworthiness associated with the inability of successive governments to resolve disruptive civil unrest, which threatens to extend an already protracted period of political uncertainty," said Vincent Ho, Associate Director in Fitch's Sovereign Group.

"The cumulative effect of repeated episodes of political disorder is a structural weakening of Thai governance, undermining the authority of the state and the credibility of the country's political leadership," Ho added.

According to Fitch, Thailand's sovereign ratings are still supported by a sound fiscal position and strong external finances. The general government balance and debt/GDP ratio have been consistently better than the 'BBB' peer group median in recent years. Net external credit/GDP (including the public and private sectors) is by far the largest of any 'BBB'-rated sovereign, and the sovereign's net external credit position exceeds US$90bn.