Moody's Investors Service says Thailand's "Baa1 stable" rating is supported by a very strong government financial position, well-diversified economy and high foreign reserves.
Moody’s examined the sovereign in four categories: economic strength, which is assessed as “high”; institutional strength “high (-)”; fiscal strength “very high (+)”; and susceptibility to event risk “moderate (+)”.
The report constitutes an annual update to investors and is not a rating action. The report also contains Moody’s analysis of how the sovereign’s credit metrics are affected by the revised national accounts data released on May 11.
While some of the ratios Moody’s examines changed, the impact on Thailand’s credit metrics is limited.
“Thailand’s low funding costs and favourable debt structure, which stem from prudent monetary policy and debt management, are a core strength in the government’s debt-carrying capacity” Steffen Dyck, a vice president and senior analyst, said yesterday.
The high level of forex reserves limits external vulnerabilities, he said. Manufacturing, wholesale and retail trade, and agriculture accounted for 52 per cent of nominal gross domestic product and 66 per cent of employment last year. The services sector was the largest source of GDP growth last year, while the contribution from agriculture was negligible.
Increased public investment spending will be the key to growth recovery this and next year, while sluggish external demand recovery and constraints on private consumption spending from high household debt act as a drag on growth. Infrastructure improvements will help improve Thailand’s regional competitiveness.
The military coup a year ago restored public order and stemmed economic uncertainty, but the deep political polarisation remains a key issue affecting the growth outlook and, if left unresolved, could again destabilise the country’s politics and economics and erode Thailand’s fundamental credit strengths.