Fitch forecasts improvement in Thai corporates’ credit outlook this year
Fitch Ratings Thailand expects Thai corporates’ credit outlook to improve this year as vaccination is rolled out and economic activity recovers.
However, the pace of recovery for tourism would be slow amid prolonged travel and social distancing restrictions, the credit rating agency warned in its briefing on Wednesday.
It added Thai banks would face restricted profitability for the next few years amid the sluggish recovery. In April last year, Fitch lowered its operating environment mid-point score for Thai banks from BBB+ to BBB due to pressure from the pandemic.
Wednesday’s briefing also identified corporate sustainability as a trend that was “shaping longer-term structural trends that will affect many of these sectors beyond the recovery”.
In 2021, the outlook for the oil & gas and petrochemical sectors will remain negative, as leverage will remain high despite a recovery in earnings, said Fitch. Telecoms companies should have enough rating headroom to absorb an increase in spectrum payments and 5G investment, it added. In comparison, the outlook for the food retail sector would remain stable as earnings rebound. Fitch expects the outlook for the building material and power & utilities sectors to be stable in the coming years.
On global ESG (environmental, social, and corporate governance) trends, sustainability considerations are increasingly being incorporated into policies, corporate governance frameworks, and the lending and investment decisions of financial institutions, said the agency. This would increase the influence of ESG considerations on company strategy, financing and operating environments in 2021.
It also expects that the Securities and Exchange Commission's proposed rules to support sustainability-linked bonds will increase the number of corporates able to issue ESG-related bonds.