Ratings agency Fitch Ratings announced a one-notch upgrade in Thailand's credit rating as of Friday, supported by declining policy risk, stable finances and low public debt.
The upgrade raises the country's long-term foreign currency rating to BBB+ from BBB, with a stable outlook. The short-term foreign currency rating was also upgraded to F2 from F3, while the country ceiling was hiked to A- from BBB+.
Credit ratings are widely used in the financial markets to help price new debt issues, with the sovereign rating used as a benchmark by investors for pricing risk and private company debt.
Fitch said the country's economy has been "resilient to repeated shocks" with average growth of 2.9% between 2008-2012, exceeding the average 2.5% growth posted for A-rated economies. Investment has also accelerated in recent years, and Fitch noted that policy risk under the present government has declined.
"The government, led by Yingluck Shinawatra, has consolidated its position and has faced no serious extra-legal challenges since its election in July 2011," the agency said. Government debt also remains relatively low, with public debt-to-GDP expected to remain below 50% despite a planned increase in infrastructure costs.
"Primary constraints on the ratings are relatively low average income reflecting low productivity and value-added activity, relatively high private sector indebtedness, and diminished but still present social and political tensions," Fitch said.
Economic overheating, a resurgence in social and political tensions or new global economic shocks could also hurt the current rating.