The Thai economy typically rapidly recovers from political unrest, dating back to the 1932 revolution. History is expected to repeat itself this time, meaning the country's credit ratings could again escape a downgrade, said a source at the Finance Ministry's Public Debt Management Office (PDMO).
Since 1932 when Thailand became a constitutional monarchy, PDMO data show the effect from political turmoil on the economy has been short-lived. The Thai economy usually rebounds once the crisis ends, said the source, who did not want to be named.
Standard & Poor’s, Moody's Investors Service, Fitch Rating, Japan Credit Rating Agency (JCRA) and Rating and Investment Information recently said they are maintaining Thailand’s credit ratings and outlook, despite the political unrest that flared up in October. However, they have that warned political uncertainty is a negative factor that needs close monitoring, with Moody's adding protests extending into the second half could trigger a negative rating.
JCRA affirmed Thailand's credit rating at A-, Fitch stayed at BBB, and the remainder kept their BBB+ rating.
Foreign economists have dubbed the country "Teflon Thailand" because past episodes of political and economic chaos including the Tom Yum Kung crisis in 1997, the military coup in 2006 and the devastating floods in 2011 all failed to make a significant dent in the economy.
"Even though we have an internal political rift, credit ratings agencies have never talked of cutting our country's outlook from positive to negative,'' the source said.
But the source admitted that a prolonged political stand-off could blunt the country's competitiveness, economic growth and the government's repayment ability, the main factor for credit ratings.
Protracted political battles have also prevented major ratings agencies from upgrading Thailand's credit rating to A, as it was before the 1997 financial meltdown, because of the likelihood the government will not be able to pass major policy proposals, the source said.
Contingent liability, largely from populist policies, is another concern of credit ratings agencies, because these policies could be adopted by the next government to garner more voter support, creating a burden in the long run. Public debt measured against GDP remains 45% compared with the Finance Ministry's threshold of 60%.