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Sovereign rating

Early elections will not resolve deepening crisis: Moody's

The barb wires can't pave way for smooth transition.

The barb wires can't pave way for smooth transition.

Moody's Investors Service' analysts foresees continued anti-government protests after the early elections in February.

In the report "Moody’s Credit Outlook" released today, Steffen Dyck, AVP, Sovereign Risk Group of Moody’s Investors Service Singapore , and Tom Byrne, senior vice president, Sovereign Risk Group, said that the dissolution of parliament and early elections will not resolve Thailand's political crisis, a credit negative.

They added that it remains unclear whether the Democrat Party will participate in the election. And, given the strong electoral support that Pheu Thai Party enjoys, early elections are unlikely to change current majorities in parliament.

"Thailand will face continued anti-government protests because protesters do not accept a democratic system based on majority rule by its opponents," they said.

In the report, they said the leader of the anti-government protesters, Suthep Thaugsuban, has said that the dissolution of parliament and early elections are insufficient measures. Rather, his stated goal is to topple the "Thaksin regime" and replace it with a royally appointed council, an outcome that holds no promise of resolving the deep political divide and turbulent political developments that have played out in Thailand between the royalist Democrat Party and the various manifestations of the populist Pheu Thai Party over the past six years.

If the opposition Democrat Party does not participate in the February elections, it could consequently lead the Constitutional Court to declare the election outcome invalid, similar to events that occurred in 2006.

"As we had stated last week, the key credit-negative feature for the sovereign is that prolonged protests will weigh on an already fragile growth outlook for 2014. In addition, heightened political tensions have marred investor confidence, as reflected in the accelerated decline in Thailand's official foreign exchange position since late October," they said.

"Since the underlying polarisation of Thailand's polity erupted with a military coup in September 2006, the recent weakening in Thailand's overall external payments position has been one of the most sustained it has experienced."

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