Thailand’s negative outlook poised to improve

Thailand’s sovereign ratings outlook may improve in the near future, says the Public Debt Management Office. The three major ratings agencies currently maintain a negative outlook on Thailand’s sovereign ratings. Standard and Poor’s and Fitch Ratings have BBB+ and Moody’s with Baa1. Ratings play a pivotal role in setting prices on both the public and private sectors’ new debt issues. Negative outlooks indicate the risk of a possible ratings downgrade due to deteriorating credit fundamentals — slowing economic growth and the impact of the global recession in Thailand’s case. But Thailand’s outlook could be revised to “stable” as some indicators have improved, said PDMO director-general Pongpanu Svetarundra.

Risk has increased since protesters from the anti-government United Front for Democracy against Dictatorship surrounded Government House, calling for the Abhisit administration’s ouster. Managing public debt has become more challenging during the financial crisis. It has increased sharply on a global basis, as governments have used fiscal spending to boost growth.

Thailand’s public debt will rise to 43 percent of gross domestic product by the end of the 2009 fiscal year, up from 39 percent last year, based on a projection of zero economic growth. But debt levels could reach 46 percent of GDP this year, and 50 percent in 2010, if the economy contracts. The Finance Ministry said economic growth could fall to 2.5 percent this year.