Fitch: Thailand Unrest Highlights Political Fissures


HONG KONG/SINGAPORE, November 26 (Fitch) Thailand's politicalinstability has once again come into the limelight with the recent takeover ofsome ministerial offices by anti-government demonstrators. But widespreaddisturbances, especially in and around Bangkok, have become an ongoing featureof the political landscape since 2006 without gravely threateningunderlying economic or financial stability, says Fitch Ratings. A degree of political volatility is factored into the ratings.It would take a major impact on growth or investor confidence to triggernegative rating action - which Fitch does not expect to happen. Growth fundamentals have withstood recurrent political andexternal shocks relatively well, including the massive floods of late 2011. GDPgrowth has averaged around 3% year-on-year from 2008-2012, higher than the'BBB' peer average of 2.6%. Moreover, the volatility of GDP activity over alonger time horizon is 3.2pp, only 10bp higher than for Thailand's ratedpeers. Financial fundamentals have also remained resilient. Previousepisodes of political upheavals in recent years did not result indiscernible outflows of domestic- or foreign-owned capital. Nor did they widen sovereigncredit spreads to the extent of hurting government debt dynamics. All of this does not imply that the credit profile isunassailable. Fitch believes political instability has retarded progress oninfrastructure development - and thereby constrained Thailand's growth andinhibited convergence with its higher-income peers. Moreover, political noise could increase investor skittishnessas the US Fed's tapering of Quantitative Easing draws closer (even if the timingremains uncertain). Amid the recent emergence of a small current accountdeficit, Thailand has a combination of above-trend (although slowing)activity, near-zero real interest rates and an anticipated rise in its budgetdeficit. The combination of rising financing requirements amid anunsettled political environment and an onset of Fed tapering could thus placepotentially greater strain on the sovereign's credit profile than currentlyanticipated. But the country's net external creditor position offers a significantbuffer. Fitch expects the recent political disturbances will dissipatein the run-up to the king's birthday on 5 December. However, the upshot is thatthe recurrence of periodic bouts of political instability pressurises thesovereign credit profile to some degree, and constrains any prospect of uplift. But itremains difficult to conceive of an escalation in ongoing disturbances to a scalewhere they pose a clear and present danger to overall growth or financialstability. Contact:Art WooDirectorSovereigns+852 2263 9925Andrew ColquhounSenior DirectorSovereigns+852 2263 9938Aninda Mitra Senior DirectorFitch Wire+65 6796 7232Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234,Email:; Wai-Lun Wan, Hong Kong, Tel: +8522263 9935, Email: above article originally appeared as a post on the FitchWire credit market commentary page. The original article can be accessed All opinions expressed are those of Fitch Ratings.ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS ANDDISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THISLINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION,RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLEON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS,CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'SCODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATEFIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLEFROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHERPERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES.DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN ANEU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUERON THE FITCH WEBSITE.

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