The bomb attack in Bangkok on Monday night has limited immediate impact on the sovereign credit support for Thailand but downside risks caused by weaker tourism are increasing, said Standard & Poor's Ratings Services.
“Our sovereign credit ratings on Thailand (foreign currency ‘BBB+/Stable/A-2’; local currency
‘A-/Stable/A-2’) are unaffected. Nevertheless, the attack has increased uncertainties over political stability and will put additional pressure on near-term economic prospects,” it said in a statement.
It added that weaker tourism trade at least in the next two to three quarters would likely hurt Thailand’s economic growth. The explosion could have a longer-lasting impact on visitor numbers compared with previous incidents in the past decade.
S&P expects tourists to be more wary this time as the incident appeared to be aimed at creating casualties in a venue popular with foreign visitors.
The latest official release indicates that Thailand’s economic performance remained weak in the first half of 2015 despite a sizeable increase in public spending. A slowdown in the tourism sector would further dampen growth. This would weaken sovereign credit metrics, including economic growth and fiscal indicators, unless an unexpectedly swift improvement in political stability materialises.
Meanwhile yesterday, the Stock Exchange of Thailand’s composite index dropped 36.13 points or 2.56 per cent to close 1,372.61 with trade value Bt78.34 billion. This was a rebound from 46.05 points at 4.13pm.
Net sales by foreign investors totalled Bt6.9 billion.
Tim Leelahaphan of Maybank Kim Eng Securities (Thailand) said this "one-off" attack was the deadliest in Bangkok in recent memory but was under control for now, and as long as there was no secondary attack of similar severity, then its impacts on the tourism sector, the baht and the stock market should be minimal.
"The impact on the baht is small and the stock market has already begun to rebound in the afternoon after a more than 40-point drop in the SET Index this morning," he said yesterday.
"The baht weakened to a six-year low against the dollar at 35.541 yesterday morning, after earlier touching Bt35.572. We note that increased tourism and government spending was a major contributor to Thailand’s GDP growth in the second quarter, which shows that Thailand’s recovery is gaining momentum. But the tourism sector will now be impacted," he added.