Factors making up Thailand's sovereign credit rating all show high economic stability, except for susceptibility to political risk events like the outcome of the upcoming election, according to a credit opinion report issued by Moody's Investors Service.
A worsening of the country's "moderate" risk of susceptibility to events is the biggest threat to the credit rating, while increasing economic competitiveness through initiatives like Thailand 4.0 could improve Thailand's rating.
The international credit rating agency has assigned a Baa1 rating to Thailand, citing high economic and institutional strength, high economic resiliency and very high fiscal strength.
"From a sovereign credit perspective, we look at the probability of a political event occurring and the severity of that political event," said Matthew Circosta, a Moody's analyst. "The risk around the election would be if we see some backsliding to the implementation of reforms such as the EEC (Eastern Economic Corridor), which is important in addressing some of Thailand's structural constraints such as competitiveness."
Moody's lowered Thailand's political risk score in 2017 from moderate+ to moderate as a result of the economy's resiliency to political turmoil, remaining robust even through a coup.
"What we've seen in Thailand over several years is the ability to withstand political shocks and navigate through them," Mr Circosta said. "We lowered our assessment because the authorities were able to forestall a deterioration in the broader credit profile."
Thailand ranks higher than most of its similarly rated peers in terms of susceptibility to risk from debt. Thailand's debt burden is lower than other Baa-rated and Asean countries, and its annual deficits are modest. The government has a low share of debt dominated in foreign currency and has a large supply of foreign exchange reserves, reducing risk from external vulnerabilities.
But Thailand suffers in terms of competitiveness compared with other countries in the region like Malaysia and Singapore. It ranks particularly low on Moody's competitiveness index in terms of innovation and labour market efficiency.
"It's around this competitiveness issue that Thailand lags behind sovereigns such as Indonesia and the Philippines," Mr Circosta said. "If we see enhanced competitiveness and growth potential, then that would be one factor that could lead the rating up, and that would come on the back of greater political stability."
Moody's also predicts a global slowdown in economic growth in 2019 and 2020, exacerbated by trade tensions between the US and China.
Thailand is considered relatively resilient to external pressures but will likely suffer economically because of its reliance on exports to China, especially electronic parts. Thailand could capitalise on the trade war, however, if exports increase to the US and Europe as a result.
