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Thailand’s political restart ‘aims at bridging divisions’: report

Jul 15. 2019
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The election of a new government has allowed Thailand’s political system to evolve in response to society’s demands, even if the process is gradual, S&P Global Ratings said on Monday in a report, titled “Thais That Bind: Credit Profile Benefits If Social Cohesiveness Improves.”

With the election of the new Thai cabinet recently, the country crossed another milestone in its return to a participatory form of government.

“We expect the new government to focus on healing the divide in the country. If the efforts show progress in the next few years, the much-talked-about reconciliation in Thailand may start. We believe this may allow a more normal form of democratic politics to take root. The Thai government’s strong credit metrics, at the ‘BBB+’ foreign currency credit rating level, could improve further in this scenario.

“The risk is that the Thai economy’s weakened competitiveness might exacerbate the disparities in the country before the impact from these efforts can be felt,” said S&P Global Ratings credit analyst Kim Eng Tan. “Political instability may become a greater issue again if that happens.”

Thailand’s sovereign credit fundamentals have weathered well the 15 years of political uncertainty since 2005. Where political uncertainty exacted its cost is in Thailand’s competitiveness and economic potential. During the 15-year period when the Thai economy grew an average 3.5-per-cent annually while every other major South and Southeast Asian economy grew by 5 per cent or more.

“Weakening competitiveness could erode Thailand’s sovereign credit support over time,” Tan said. “Apart from weighing on economic growth, it could reduce the government’s capacity to cope with its fast-ageing population.

“However, we believe recent developments increase the likelihood that Thailand could avert this pessimistic scenario. Despite the controversies around the recent parliamentary polls, the elected government has a stronger mandate to implement changes with long-lasting impact than the coup government,” he continued, stressing that the report does not constitute a rating action.

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