PM's dismissal worsens situation and may delay election: S&P
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Standard & Poor's Ratings Services may lower Thailand's sovereign ratings if further political instability leads to an unexpectedly sharp deterioration of political and institutional stability beyond what was seen in recent years.
"This is possible if future political events lead to widespread violence that seriously affects economic activities in the country for a prolonged period," the rating agency said in a note on May 8, following the Constitutional Court's decision to oust caretaker Prime Minister Yingluck Shinawatra on the charge of "abuse of power".
In the note, S&P noted that the dismissal is negative to Thailand's credit ratings, but the impacts are not immediate.
Thailand's foreign currency rating is now "BBB+".
"We believe the prime minister's dismissal will also likely further delay fresh elections - scheduled for July 20 - and, with it, the formation of a functioning
government. Already weak business and consumer confidence will continue to deteriorate. The longer the political uncertainty persists, the more damage it will inflict on Thailand's already weakened growth outlook.
"Although Thailand's generally strong fundamentals provide some cushion, growth may slow further as the absence of a functioning government depresses
consumption, and private and public sector investments. Thailand's strong external profile, modest government debt, and a track record of effective monetary policy continue to support the ratings. But the ongoing political uncertainty and Thailand's relatively low-income economy act as rating constraints."
For now, S&P viewed that the conviction was part of a number of scenarios incorporated into the ratings - reflecting its expectations of protracted and potentially increasing political instability.
"However, we view this development as credit negative. It raises the risk of violent confrontation that could ultimately involve the military, and will make any sort of rapprochement between the opposing sides of Thailand's political divide more difficult," it said.
It also viewed that forcing out Yingluck is set to aggravate already-deep divisions in Thai society. The dismissal follows months of often unlawful opposition efforts to unseat her and the nullification of an election that her party Phue Thai won in February. The court's move is likely to reinforce the belief among the
largely rural supporters of Yingluck's Phue Thai party that the judiciary is biased toward the establishment--made up of the urban elite, the military, and royalists.
