Subdued growth prospects foreseen: S&P

The rating agency projects real gross domestic product (GDP) growth to remain at 4 per cent-5 per cent over the next three years.

"We project Thailand's per capita GDP at just over US$6,000 in 2015. The military coup in May this year has restored order but the underlying social and political fissures have not been addressed. Uncertainty surrounds both the timing of the next democratic elections and whether they can lessen regional and class divides," it said in a statement released today.

The rating agency said that political uncertainty and its impact on the economy have been a 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 depresses economic growth, while street protests hurt the country's vital tourism sector. 

The rating agency today affirmed its ratings on Thailand with stable outlook. Thailand is assigned 'BBB+' long-term and 'A-2' short-term foreign currency sovereign credit ratings, and 'A-' long-term and 'A-2' short-term local currency ratings. 

"Thailand's strong external balance sheet and liquidity, a modest level of government debt, and a history of effective monetary and fiscal policies support the rating. These strengths are weighed against the economy's relatively low-income level and the country's continued political uncertainty," it said.

A key rating strength for Thailand is its strong international investment position with ample external liquidity. A long run of trade and current account surpluses and strong inflow of foreign direct investments (FDI) have created a reserve buffer of an estimated 7.3 months of current account payments. Net external liabilities are at a moderate 24 per cent of gross domestic product (GDP); more than two-thirds of Thailand's gross external liabilities are foreign direct investment (FDI) and portfolio equity investments. On a narrow net external debt basis, Thailand is in a net creditor position of about 10 per cent of current account receipts. 

"We expect Thailand's external liquidity indicators to remain strong, even if somewhat diminished from current levels as the export sector absorbs a 

negative shift in terms of trade while undergoing structural adjustment in its manufactured goods profile. We forecast that gross external financing needs in 

the next three years will rise toward 80 per cent of current account receipts, from about 70 per cent recently, and reserves will likely to fall to a still-robust six 

months of current account payments."

Thailand's generally conservative fiscal stance is manifested in long-running primary surpluses at the general government level. This has kept general 

government debt moderate, despite a costly price-support scheme for rice under previous administrations and a series of stimulus measures in response to 

economic shocks. 

"We expect net general government debt to remain comfortable at about 26 per cent of GDP in the next three years. At an estimated 7 per cent of general government revenues, the interest cost on the debt of the general government imposes moderate constraint on Thailand's fiscal flexibility."

Stable inflation has been a pillar of macroeconomic stability and a support for Thailand's growth. The country's inflation averaged 3 per cent over the past 10 

years. Price stability and a floating exchange rate regime help to maintain Thailand's export competitiveness. Credit growth has been moderate; bank 

claims on private-sector residents, as a percentage of GDP, rose to 130 per cent in 2013 from 102 per cent in 2007.

"We expect the government to gradually absorb the losses stemming from domestic credit extended in the rice price-support scheme by the Bank of Agriculture and Agricultural Cooperatives; the government estimated its maximum liability at 3.8 per cent of 2014 GDP."