https://www.moodys.com/research/Moodys-Political-polarization-pressures-Thailands-competitiveness--PR_304862Announcement:
Moody's: Political polarization pressures Thailand's competitiveness
Global Credit Research - 24 Jul 2014
Singapore, July 24, 2014 -- Moody's Investors Service says that
deep political polarization in Thailand (Baa1 stable) since 2006
is adding to structural challenges to the country's competitiveness,
and that reform delays could eventually negatively affect the sovereign's credit profile,
which has largely remained immune to the country's political disturbances.
Specifically, Moody's views that the coup d'état of May 2014 has likely,
for now, put a floor on deteriorating consumer and investor confidence.
But progress in structural economic reform likely hinges on reduced political uncertainty,
otherwise competitiveness and economic growth would further erode over the medium term.
Moody's analysis was contained in its just-released report
"Thailand: Political Polarization Adds to Structural Competitiveness Issues".
As Moody's report points out, Thailand's diversified and competitive economy
is a credit strength for the sovereign's Baa1 government bond rating.
Moody's .sment of the country's economic strength is supported
by the competitiveness of its manufacturing sector.
The sophisticated manufacturing base has helped Thailand fend off
homemade political as well as external and domestic economic shocks.
Furthermore, growth has remained resilient
during the politically turbulent periods in 2006, 2008, and 2010.
However, Thailand's trend growth has slowed sharply since late 2013.
And anti-government protests between November 2013 and May 2014
have negatively affected new investments
and the implementation of long-term structural economic policy measures.
Thailand's lead over regional competitors has also been eroding
since the 2006 coup d'état. Moody's states that challenges to the country's
competitiveness are seen in rising labor costs, and structural factors,
such as demographic changes and a falling public investment ratio.
In addition, Thailand's scores in the Global Competitiveness Index
have weakened since 2006, whereas regional competitors,
like Indonesia (Baa3 stable) and the Philippines (Baa3 positive) have been catching up.
Moody's report states that the experience during the recent period
of political unrest has shown that Thailand's sovereign credit profile
has remained largely immune to the episodes of political disturbances
since the 2006 coup. Nonetheless, improved political stability would likely provide
a more favorable environment for foreign and domestic private investment,
which in turn is needed to complement public investment.
However, Moody's notes that this will also most likely mean further delays to,
or only partial implementation of structural reforms. In addition,
if this was to translate into multiple years of below trend growth,
this could eventually be negative for Thailand's sovereign credit profile.
