TRIS Rating maps out rocky path to Thai economic recovery

THURSDAY, February 18, 2021

Thai businesses were coping with the sharp declines in revenue by aggressively cutting costs, stockpiling cash, and delaying capital expenditures in anticipation of a tough time ahead, according to TRIS Rating on Thursday.

For its latest economic outlook, the credit-ratings agency assessed three key aspects governing Thailand’s recovery – pace of recovery, debt levels, and liquidity.

The recovery paths for most businesses in the manufacturing sector started in the third quarter of 2020, it said.

However, the pace of recovery would likely vary significantly among industries. Recovery prospects in the service sector, especially for hospitality and aviation businesses, remain highly uncertain following the resurgence of Covid-19 in Thailand and globally, said TRIS.

Sharp declines in revenue and cash flows of rated companies would bring spikes in debt ratios, weakening of their financial profiles, said the agency.

However, it expects a recovery that started in the third quarter of 2020 to continue over the next few years, with a majority of the rated issuers projected to recover to pre-Covid levels in 2022.

It noted clear signs of reviving risk appetite for corporate credits, in particular debt issues from highly rated issuers. “However, the reviving market appetite has come with significantly higher borrowing costs for the issuers,” said TRIS.

It forecast Thailand’s gross domestic product (GDP) would grow by 2.6 per cent in 2021, rebounding from the 6.1 per cent contraction in 2020.

However, the GDP forecast was dependent on the arrival of three to four million tourists in 2021, since revival of Thai tourism was still the key to a swift recovery in the near term.

It noted that revival of Thai exports is slow as the world’s major economies continue to struggle with sharp increases in domestic virus infections.

Public sector expenditures would continue to be an important driver for the Thai economy over the next few years. However, the pace of recovery would be largely dictated by external factors, especially vaccinations worldwide and recovery of the global economy, said TRIS.