Research Update:

Ratings On Thailand Affirmed At

'BBB+/A-2' And 'A-/A-2'; Outlook
Stable
Primary Credit Analyst:
Agost Benard, Singapore (65) 6239-6347; agost.benard@standardandpoors.com
Secondary Contact:
KimEng Tan, Singapore (65) 6239-6350; kimeng.tan@standardandpoors.com
Table Of Contents
Overview
Rating Action
Rationale
Outlook
Key Statistics
Related Criteria And Research
Ratings List
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Research Update:
Ratings On Thailand Affirmed At 'BBB+/A-2' And
'A-/A-2'; Outlook Stable
Overview
Strong external profile, low government debt, and monetary policy
credibility support the rating, while unstable politics and low income
remain constraints.
We are affirming our 'BBB+' long-term and 'A-2' short-term foreign
currency sovereign credit ratings, and our 'A-' long-term and 'A-2'
short-term local currency ratings on Thailand.
The stable outlook reflects our expectation that macroeconomic strengths
are sufficient to counter the effects of ongoing political tension.
Rating Action
On May 22, 2014, Standard & Poor's Ratings Services affirmed its 'BBB+'
long-term and 'A-2' short-term foreign currency sovereign credit ratings, and
its 'A-' long-term and 'A-2' short-term local currency ratings on the Kingdom
of Thailand. The outlook on the long-term ratings is stable. Standard & Poor's
also affirmed the 'axAA/axA-1' long- and short-term ASEAN regional scale
ratings on Thailand. Our transfer and convertibility (T&C) assessment remains
'A'.
Rationale
Thailand's strong external profile, modest government debt, and a track record
of effective monetary policy are factors that support the rating. However, the
country's ongoing political instability and its relatively low-income economy
constrain the ratings.
A key rating strength for Thailand is its strong international investment
position with ample external liquidity. A long run of surplus balance of
payments has created a reserve buffer of an estimated 7.5 months of current
account payments. Net external liabilities are at a moderate 26% of GDP,
nearly 70% of which is foreign direct investments and portfolio equity
investments. On a narrow net external debt basis, Thailand is in a net
creditor position of more than 20% of current account receipts. Gross banking
and private sector external debt is about US$115 billion (end 2013), of which
roughly half is short-term debt. We believe refinancing this debt could be
difficult if the market sentiment toward Thailand deteriorates significantly
and sustainably.
Thailand's general government primary surpluses have kept general government
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debt at a moderate level. Although a rice price-support scheme and a series of
stimulus measures in response to a string of economic shocks have increased
government debt, we expect net general government debt to remain comfortable
at a little above 20% of GDP in the next three years. Likewise, general
government interest of an estimated 7% of general government revenues only
poses a moderate burden on public finances.
Stable inflation has been a pillar of macroeconomic stability and reflects an
above-average degree of monetary policy effectiveness. The country's inflation
averaged less than 3.1% over the past 10 years. This trend of modest inflation
augments monetary policy credibility and has helped to facilitate the growth
of financial markets in Thailand. The floating currency also enhances monetary
policy flexibility.
Political uncertainty has been a major credit weakness for Thailand in recent
years. Frequent, and at times extra-constitutional, changes in the government
since 2006 have delayed structural reforms and hindered government
infrastructure spending. The resultant uncertainty constrains economic growth,
while flare-ups in protest activity risk hurting the country's vital tourism
sector. Although the military imposed martial law this week, it insisted that
it was not trying to usurp power from the civilian government, which remains
in place. In our view, the army's action could help stabilize the situation by
forestalling a potential violent conflict between opposing sides and by
bringing the protagonists together to negotiate an interim solution so that
another election can take place.
Nevertheless, the growing political instability over the past half a year has
taken a toll on consumption and investment, depressing near-term growth
prospects. We project Thailand's per capita GDP at US$5,700 in 2014. This
income level is a key credit constraint, and will remain so in the medium term
even when growth returns to its trend rate as political conditions normalize.
Besides Thailand's income level, the country's infrastructure, health, and
education indicators are also more closely associated with sovereigns in lower
rating categories.
Outlook
The stable outlook reflects our expectation that Thailand will be able to
preserve its external, fiscal, and monetary strengths in the face of the
current political turmoil within the next two years. We may lower the ratings,
however, if political and institutional stability deteriorated beyond what we
have observed in the past seven years. This is likely if persistent widespread
violence breaks out. We may also lower the ratings if the country's fiscal or
economic indicators weaken significantly.
On the other hand, we may raise the rating if political uncertainties diminish
markedly to help improve economic and financial indicators. Such a scenario is
likely if the two key political factions in Thailand manage to negotiate a
lasting agreement.
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Research Update: Ratings On Thailand Affirmed At 'BBB+/A-2' And 'A-/A-2'; Outlook Stable
Key Statistics
Table 1
Kingdom of Thailand--Selected Indicators
2007 2008 2009 2010 2011 2012 2013e 2014f 2015f 2016f 2017f
Nominal
GDP (US$
bil.)
247 273 264 319 346 366 387 374 404 458 519
GDP per
capita
(US$)
3,918 4,300 4,151 4,992 5,394 5,677 5,976 5,752 6,196 7,020 7,926
Real GDP
growth
(%)
5.0 2.5 (2.3) 7.8 0.1 6.5 2.9 1.0 5.1 4.4 4.6
Real GDP
per capita
growth
(%)
4.7 1.9 (2.5) 7.2 (0.2) 5.9 2.3 0.7 4.8 4.1 4.3
Change in
general
government
debt/GDP
(%)
0.4 0.6 4.4 3.6 0.5 3.8 2.6 3.1 2.9 2.8 2.8
General
government
balance/GDP
(%)
0.7 0.6 (2.6) (0.2) 0.0 (1.1) 0.4 (0.8) (0.6) (0.5) (0.5)
General
government
debt/GDP
(%)
26.0 25.0 29.5 30.0 29.3 30.9 32.2 34.0 34.2 34.6 34.9
Net
general
government
debt/GDP
(%)
17.8 17.1 20.2 19.6 19.8 20.8 21.6 23.8 24.8 25.9 26.8
General
government
interest
expenditure/revenues
(%)
5.2 5.5 5.3 5.7 5.5 5.6 5.0 6.8 6.9 7.0 7.0
Oth dc
claims on
resident
non-govt.
sector/GDP
(%)
101.5 102.3 106.9 107.3 119.2 126.1 131.4 136.3 135.9 136.4 136.6
CPI
growth
(%)
2.2 5.4 (0.9) 3.2 3.8 3.0 2.2 2.4 2.7 2.7 2.8
Gross
external
financing
needs/CARs
+ usable
reserves
(%)
79.6 79.7 68.8 68.9 70.3 70.8 74.1 75.5 74.3 75.3 75.9
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Research Update: Ratings On Thailand Affirmed At 'BBB+/A-2' And 'A-/A-2'; Outlook Stable
Table 1
Kingdom of Thailand--Selected Indicators (cont.)
Current
account
balance/GDP
(%)
6.3 0.7 8.4 3.1 1.5 (0.4) (0.7) 1.8 1.8 2.2 2.6
Current
account
balance/CARs
(%)
8.1 1.0 11.3 4.2 3.2 (0.5) (0.9) 2.1 2.1 2.5 3.0
Narrow
net
external
debt/CARs
(%)
(20.8) (23.1) (39.2) (35.8) (32.7) (24.3) (12.5) (19.0) (18.7) (18.0) (18.8)
Net
external
liabilities/CARs
(%)
33.4 9.1 6.6 21.1 17.8 34.6 39.1 33.9 30.1 24.7 19.5
Other depository corporations (dc) are financial corporations (other than the central bank) whose liabilities are included in the national definition
of broad money. Gross external financing needs are defined as current account payments plus short-term external debt at the end of the prior year
plus nonresident deposits at the end of the prior year plus long-term external debt maturing within the year. Narrow net external debt is defined as
the stock of foreign and local currency public- and private- sector borrowings from nonresidents minus official reserves minus public-sector liquid
assets held by nonresidents minus financial sector loans to, deposits with, or investments in nonresident entities. A negative number indicates net
external lending. CARs--Current account receipts. The data and ratios above result from S&Ps own calculations, drawing on national as well as
international sources, reflecting S&Ps independent view on the timeliness, coverage, accuracy, credibility, and usability of available information.
Related Criteria And Research
Related Criteria
Sovereign Government Rating Methodology and Assumptions, June 24, 2013
Methodology For Linking Short-Term And Long-Term Ratings For Corporate,
Insurance, And Sovereign Issuers, May 7, 2013
Methodology: Criteria For Determining Transfer And Convertibility
Assessments, May 18, 2009
Understanding National Rating Scales, April 14, 2005
Related Research
Bulletin: Dismissal Of Thailand's Prime Minister Is Credit Negative, But
Rating Not Affected, May 8, 2014
Sovereign Defaults And Rating Transition Data, 2013 Update, April 18,
2014
Thailand's Rice Support Scheme Highlights Policy Risk But Won't Hurt The
Sovereign Rating, March 12, 2014
Election Woes In Bangladesh And Thailand Raise Risk But Don't Yet
Undermine Sovereign Ratings, Feb. 18, 2014
In accordance with our relevant policies and procedures, the Rating Committee
was composed of analysts that are qualified to vote in the committee, with
sufficient experience to convey the appropriate level of knowledge and
understanding of the methodology applicable (see 'Related Criteria And
Research'). At the onset of the committee, the chair confirmed that the
information provided to the Rating Committee by the primary analyst had been
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Research Update: Ratings On Thailand Affirmed At 'BBB+/A-2' And 'A-/A-2'; Outlook Stable
distributed in a timely manner and was sufficient for Committee members to
make an informed decision.
After the primary analyst gave opening remarks and explained the
recommendation, the Committee discussed key rating factors and critical issues
in accordance with the relevant criteria. Qualitative and quantitative risk
factors were considered and discussed, looking at track-record and forecasts.
The chair ensured every voting member was given the opportunity to articulate
his/her opinion. The chair or designee reviewed the draft report to ensure
consistency with the Committee decision. The views and the decision of the
rating committee are summarized in the above rationale and outlook.
Ratings List
Ratings Affirmed
Thailand (Kingdom of)
Sovereign Credit Rating
Foreign Currency BBB+/Stable/A-2
Local Currency A-/Stable/A-2
ASEAN Regional Scale axAA/--/axA-1
Thailand (Kingdom of)
Senior Unsecured BBB+
Senior Unsecured A-
Commercial Paper A-2
Complete ratings information is available to subscribers of RatingsDirect at
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this rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left
column.
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Research Update: Ratings On Thailand Affirmed At 'BBB+/A-2' And 'A-/A-2'; Outlook Stable
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