Posted on 22 Jul 2014
Thailand's credit outlook is stable along
with others in Asia Pacific, said Moody's Invstors Service, but political
developments will be key.
"While the recent coup d’etat has
provided some relative stability, growth now is significantly weaker than it
was in 2006 when the military last took administrative matters into its own
hands," the rating agency said.
Moody’s Asia-Pacific sovereign analysts
expressed these views at conferences in Hong Kong and Singapore entitled
"Credit Differentiation matters in a Basel III World." Moody’s
assigns "Baa1" rating for Thailand.
The rating agency forecasts the 2.7 per
cent growth rate for Thailand this year, before slightly picking up to 3.2 per
cent next year. At this rate, the 2014 growth forecast is the lowest in 10
economies (Ex-Japan) covered.
Growth forecasts
Country/ 2014/ 2015
China 7.0 7.0
India 5.0 5.6
Indonesia 5.4 5.8
Japan 1.0 1.5
Korea 3.8 3.8
Malaysia 5.3 5.0
Philippines 6.0 6.3
Singapore 4.0 4.4
Taiwan 3.3 3.5
Thailand 2.7 3.2
Vietnam 5.5 5.7
Source: Moody’s Investors Service
For the entire Asia Pacific, Moody’s said
that the credit outlook is stable, although the slowdown in China’s expansion,
rising interest rates, and lackluster growth in advanced
countries are constraining regional
economies.
Of 22 sovereigns in the Asia-Pacific
region, most have stable outlooks, indicating its broad expectation of steady
credit conditions over the next 12 to 18 months. Malaysia (A3) and the
Philippines (Baa3) are on positive outlook, while Mongolia (B2) is on negative
outlook.
A focal point for investors has been the
extent to which activity in China (Aa3 stable) will cool as authorities wean
the region’s largest economy off its dependence on public-backed and
credit-fueled investment for growth. Moody’s takes the view that policymakers will
be able to achieve a soft landing, with GDP expanding between 6.5 per cent and
7.5 per cent this year and next. But in the case of a steeper downturn in
demand, large commodity exporters such as Australia and Indonesia would be most
exposed. In contrast, among Asean countries, the Philippines could be the best
insulated against a further slowing in Chinese growth given its reliance on
domestic demand, services exports, and overseas workers’ remittances.
Meanwhile, signs that Japan’s (Aa3 stable)
economy is on the road back to healthier rates of growth also bode well for the
region as a whole.
In a number of countries in Asia Pacific,
interest rates have started to rise from extraordinarily low levels. At the
same time, trends in global liquidity conditions will be the key driver of
capital flows, especially as the US Federal Reserve navigates its exit
strategy. Consequently, tighter funding conditions may have differing impacts
on sovereign creditworthiness depending on countries’ respective reliance on
external financing.
