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No sign yet of credit rating downgrade

Agencies concerned about long-term effects of populist policies

Global credit-rating agencies are maintaining their outlook on Thailand despite the political unrest, but are keeping a close watch on populist projects that could continue to drive government expenditure for the long term, according to the Finance Ministry's Public Debt Management Office.

"Although we have political problems, the rating agencies have not mentioned changes in their outlook on the country from 'positive' to 'negative'," an anonymous PDMO source said. "Therefore, there should not be talk of a credit-rating change on government bonds."

Previously, Standard & Poor's and Moody's Investors Service asked for economic information on which to evaluate their assessment of Thailand.

The source said that based on Western countries' principles, when there is a political change in a country, there can be severe impacts on its economy. However, this has not been the case for Thailand so far, as rating agencies have made no mention of downgrading their outlooks.

Earlier, some agencies suggested that if the political crisis were prolonged and affected the country's economic structure, competitiveness, investment and gross domestic product, they might downgrade Thai government bonds' credit ratings. However, if the political situation eases, that could be positive to the nation's ratings.

The source said the ratings could be affected if the political problem began to affect Thailand's competitiveness, economic growth and ability to service its debts.

However, the Thai economy is resilient to crises, including the 2006 military coup, the Asian financial crisis in 2007, and the big floods in 2011.

Expensive commitments

The source said ratings agencies were concerned over expensive commitments placing a burden on government financing, particularly populist projects like the rice-pledging programme.

Credit-rating agencies have said a core problem is Thailand's income gap, the source noted, adding that if this were not rectified, it was possible for subsequent governments to continue populist policies that led to long-term budget commitments.

The government's current debt level is 45 per cent of GDP, lower than the 60-per-cent ceiling.

Based on a PDMO study, since 1932 when Thailand's first Constitution was signed, political changes have had short-term impacts on the economy.

"The PDMO, as an agency [responsible] for the country's credit ratings, found that political changes affected the economy in the short term only. When the political situation eased, the economy picked up thereafter," the source said.


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