Politics to ‘shape sovereign rating’
POLITICAL uncertainties remain high and the bickering is expected to continue for a while, adding to uncertainties in Thailand’s economic outlook and possibly leading to pressure on its sovereign rating, according to S&P.
Kim Eng Tan, an analyst at S&P Global Ratings, said in a report on “Sovereign Risk in Southeast Asia Pivots on Politics”, that given the weak economic performance since the coup, Prime Minister Prayut Chan-o-cha is likely to keep his word to go ahead with an election rather than be blamed for a further deterioration of growth prospects.
There is no guarantee, however, that he will write a constitution that Thai politicians will accept.
So the political bickering could go on for some time, while little is expected to change in improving the country’s infrastructure or education system.
Thanks to Thailand’s relatively conducive investment climate and its attraction as a tourist hub, growth remained at close to 3 per cent last year.
However, the continued political instability is damaging the economy’s potential even as international competition intensifies with the rapid development of Vietnam and Myanmar’s opening.
“Even without a possible violent confrontation in the country, a further slowdown in Thailand’s economic growth trajectory could erode its sovereign credit metrics over the next few years,” he said.
The policy environment is unlikely to improve much in the near future, as the junta attempts to extend its influence beyond the election promised by the middle of next year.
Malaysia and the Philippines are also highlighted in the report.
In Malaysia, the 1MDB saga is a threat to political stability, making the company an important development for the government’s credit standing.
In the Philippines, the risk of political uncertainty is somewhat higher if Rodrigo Duterte wins the presidency. He will be the second president after Estrada who does not represent elite families.
If Duterte’s style leads to serious political battles, it could damage one of the Aquino administration’s key achievements – a sustained period of political stability.
A return of political confrontations could weaken the improving trend for sovereign credit metrics.
Since 2013, S&P has upgraded the Philippines twice.
Meanwhile, S&P Global Ratings yesterday said its sovereign credit ratings on Philippines are unaffected by Duterte’s likely win. It said that Duterte has given few details regarding the shape of economic policies to come under his presidency, but S&P expects him to continue with policies that had contributed to sovereign rating improvements in the past few years.
Duterte’s track record of more than 20 years in Davao gives few indications that he would embark on economic policies significantly different from the Arroyo and Aquino administrations, S&P said.
