International credit rating firms are likely to lower Thailand’s BBB+ credit rating if anti-government protests are further prolonged or turn increasingly violent, permanent secretary for finance Rangsan Sriworasart warned on Tuesday.
If the country's credit rating is cut then lending costs for both the government and private sector would rise, he said. Foreign investment in Thailand would also fall off.
Mr Rangsan admitted that the occupation of the Ministry of Finance is preventing officials from fully responding to the needs of other state agencies and distributing fiscal budget funds.
He called on protesters to vacate the premises as soon as possible, so that officials can get back to work and perform their duty in serving the general public.
Somchai Sajjapongse, director general of the Fiscal Policy Office, said continuing anti-government rallies had hurt the tourism sector and delayed government spending, adding to the problem of a slowdown in private consumption.
People shop in a supermarket inside a department store in Bangkok. (Reuters Photo)
The protests would trim gross domestic growth for 2013 to only 3%, from a previous projection of 3.7%, he said.
If the rallies go on longer the government’s planned investment in its 2-trillion-baht infrastructure development megaprojects would also be held back, derailing economic expansion for 2014, which had been forecast to run at 5%, Mr Somchai said.
The government could be forced to come up with a budget deficit policy to mobilise the economy, he added.
The central bank's monetary policy committee cut its key policy rate to 2.25% late last month to boost the economy, but the measure would not help much in the face of the political turmoil, the director general said.
The SET Index rose 0.7% to 1,383.89 on Tuesday. The benchmark gauge for the country's US$371 billion stock market retreated 5% last month as foreign investors sold a net $1.5 billion of shares, the most among 10 Asian markets tracked by Bloomberg news agency. The baht weakened 0.2% to 32.190 per dollar. Markets will be closed on Thursday to mark His Majesty the King's 86th birthday.
The baht has slumped 5% against the US dollar this year, set for its biggest annual decline since 2005. The currency will probably remain weak as protests add to investor concerns about subdued exports and the country's current-account deficit, according to Kokusai Asset, which manages about $37 billion.
Thailand's overseas sales dropped 0.67% in October, versus the median estimate for a gain of 0.4% in a Bloomberg survey of economists. The country's current-account gap this year is $5.7 billion, on pace for the biggest annual shortfall since 2005, according to data compiled by Bloomberg.
Thailand's economy grew 2.7% in the third quarter from a year earlier, the slowest pace since the first three months of 2012, official data show. The central bank cut its 2013 growth estimate to about 3% from 3.7% on Nov 27.
"The longer this situation lasts, the more impact we will see on the economy," Takahide Irimura, the Tokyo-based head of emerging-market research at Kokusai Asset, said. "The outlook doesn't look good on the market and on the economy at this point."
While political tension may ease ahead of His Majesty the King's birthday celebration, protests may resume soon after, said Jade Donavanik, dean of the Graduate School of Law at Bangkok's Siam University.
"This is like pressing the pause button on a movie," Mr Jade said. "You never know from here on whether it will be a happy ending or whether everyone will die at the end."