Singapore, April 25, 2013 -- Moody's Investors Service says -- in a just-released
credit analysis on Thailand -- that a high degree of government financial
strength, moderate levels of economic and institutional strength,
and low to moderate susceptibility to event risk continue to support the
country's Baa1 local and foreign currency bond ratings.
The ratings outlook is stable.
The government's high financial strength is primarily derived from
a relatively low government debt burden that is amply financed by deep
onshore capital markets.
Although revenue mobilization is the weakest amongst its peers in its
methodological rating range of A3-Baa2, adherence to implicit
fiscal rules has ensured that deficits have been largely contained.
While Moody's does not anticipate a material deterioration in Thailand's
fiscal metrics in 2013-14, populist measures pose a risk
to fiscal discipline and increased off-budget financing impairs
transparency.
The country continues to enjoy a low degree of external liquidity constraints,
owing to its strong external payments position, despite a pick-up
in the external debt-to-GDP ratio in 2012.
In terms of economic strength, the country recorded nominal GDP
of USD366 billion in 2012, making it the 29th largest economy in
Moody's rated universe, the ninth-largest among Baa-rated
sovereigns, and the second largest in ASEAN, after Indonesia.
It also recorded 6.4% real GDP growth in 2012, which
was one of the strongest performances in the region. Quarterly
growth in 2012 rose from 0.4% year-on-year
in the first quarter to 18.9% in the fourth quarter,
and was the strongest on record, driven by post-flood reconstruction
but also strengthened private consumption.
Its large and diversified economy, characterized by strengths in
moderate value-added manufacturing, tourism, and agricultural
exports, has recovered from the cyclical shock caused by flooding
in the second half of 2011.
Moody's expects real GDP growth of 5% in 2013 and 2014,
supported by robust private consumption and investment, whereas
export recovery will likely remain more subdued owing to the still fragile
external demand and the rapid strengthening of the Thai baht, which
is up more than 6% versus the US dollar since the beginning of
the year.
The country also demonstrates moderate levels of institutional strength.
Although tensions and polarization have continued to affect Thailand's
political system since the 2006 coup, the country's core economic
institutions have helped to maintain macroeconomic stability and a competitive
investment climate.
Fiscal discipline has been tested by successive crises, but fiscal
and debt ratios continue to be in line with rating peers, even when
factoring in negative repercussions from populist fiscal policies.
Thailand has a robust external payments position which has enabled favorable
financing conditions for the government and the economy at large.
Finally, Thailand's susceptibility to event risk is shown
to be low to moderate, balancing prominent political risks against
resilient economic and financial fundamentals.
The sound banking system helps to mitigate financial event risks;
the average bank financial strength rating for Thai banks rated by Moody's
is D+, above the global universe of D.
Since 2008, banks' balance sheets have only been indirectly
affected by the global financial crisis and the sovereign debt crisis
in Europe.
Similarly, the 2011 floods had only a very muted impact on the Thai
banking system.
Subscribers can access the report, "Thailand, Government
of," at http://www.moodys.com/research/Thailand-Government-of-Analysis--PBC_152865
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Moody's: High government financial strength supports Thailand's Baa1 rating