Thailand’s relative economic stability defies its political turmoil. Source: Wikimedia
Moody’s Investors Service is predicting that below-trend Thai growth over the previous 24 months indicates that the kingdom is facing emerging competitiveness issues that could hamper long-term outlook for GDP growth, and also signal looming political risks.
Meanwhile, Thailand (Baa1 stable) also demonstrates a sound fiscal position and limited external vulnerability, as well as favourable funding conditions. The junta’s low-debt servicing costs and limited refinancing risks, reflect the sovereign’s proactive and credible management of debt and monetary policy.
Moody’s conclusions in its recent credit analysis, “Government of Thailand – Baa1 Stable” examines the sovereign with respect to four factors: economic strength, which is judged as “high (-)”; institutional strength “high (-)”; fiscal strength “very high” and susceptibility to event risk “moderate (+)”.
Moody’s said Thai merchandise exports have weighed on economic growth in line with the reduced trade across the wider Asia-Pacific region. In US dollar terms, Thai exports have contracted year-on-year for 10 of the past 13 quarters since the start of 2013.
The report offers an annual update to investors and is not a rating action.
Moody’s report says Thai fiscal indicators remain stronger than its peers, despite fiscal accommodation resulting in higher debt levels. Limited domestic demand and low prices for Thai commodity imports have supported the current account amid faltering goods exports, and the wide current account surplus serves as a buffer to unstable capital movements.
Political uncertainty also surrounds the controversial August 7 referendum on the military-drafted constitution and the slippery timeframe presented for a return to democratic elections, which analysts fear will not be very transparent if the new charter is approved. The ongoing poor health of the ailing king also adds to the underlying uncertain business climate.
Increased public spending and robust tourist arrivals have boosted growth, against a backdrop of limited overseas demand and a feeble private sector.
Thai services exports have been robust over the last 12 months, driven by visitor arrivals, especially from China (Aa3 negative).
Moody’s predicts GDP growth to remain consistent for the next 12 months at around 2.8 per cent in 2016 and 3.0 per cent in 2017.