Renewed political disruption and a significant and sustained rise in government debt ratio are the main negative sensitivities for Thailand's sovereign credit rating outlook going forward, says Fitch Ratings.
"Renewed political disruption on a scale sufficient to negatively affect Thailand's economy" is the main negative sensitivity for the country's sovereign credit rating outlook, according to Fitch.
Thailand's political environment remains divisive, marked by recent youth demonstrations, while the recent cabinet reshuffle adds to the ongoing political uncertainty.
"Our BBB+ rating explicitly incorporates lingering uncertainty and risks in the broader political environment," Fitch said. "Renewed political disruptions alone are unlikely to have immediate rating implications, despite uncertainty over the recovery outlook."
The rising public-debt-to-GDP ratio is another negative sensitivity for Thailand's credit rating assessment.
"A significant and sustained rise in Thailand's government debt ratios; for example, due to fiscal deterioration or appearance of contingent liabilities on the sovereign balance sheet," Fitch said.
A resumption of resilient growth without the emergence of imbalances and lower social and political tensions are positive sensitivities for the credit rating outlook, the ratings agency said.
Fitch maintained Thailand's sovereign credit rating at BBB+.
"The BBB+ rating reflects Thailand's sound public and external finances, which serve as a cushion against economic and financial shocks," Fitch said. "These strengths are countered by weaker structural features relative to peers, including lower World Bank governance scores and, to a lesser extent, lower income per capita. The March revision of Thailand's outlook to stable from positive reflects the significant risks to growth posed by the global coronavirus shock."
Thailand's real GDP contracted by 12.2% year-on-year in the second quarter, the largest economic decline in 22 years.
A mix of a merchandise export slump, a complete halt in foreign tourism and weak consumer sentiment amid pandemic lockdowns pushed Thailand's trade- and tourism-dependent economy into deep recession, Fitch said.
"Fitch expects a more sluggish recovery in the second half in light of weak external demand and a delay in the travel bubble plan," the agency said. "Domestic tourism and consumption will gradually recover in the final quarter, underpinned by government stimulus packages."
Full-year GDP is expected to contract by 7.8% this year before rebounding to 4.7% in 2021.