Rallies 'may spark credit-rating cut'

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.

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."

Share your thoughts

Discussion 1 : 04/12/2013 at 01:55 PM
Buy votes ... and respect the outcome? Is that democracy?
Discussion 2 : 04/12/2013 at 07:02 AM
You are making the false assumption that the point of the "protest" is to be "heard", or that this was a "protest" at all. This was and is an "uprising" and it's intent is to replace the government. You are also incorrectly using the term "democracy", which does not apply to the Shinawatra regime, who purchases votes directly -- which in turn does far more to damage the economy than a few short weeks of protests.
Discussion 3 : 04/12/2013 at 03:08 AM
Already 29 countries warned their citizens about coming to Thailand. If I owned a business involving tourism I'd be against this protest. There are amny avenue to air your grievance or to pursue changes. Protesting is the most costly to the economy. Plus this is not even a democratic way to do. This is a BULLY method.
Discussion 4 : 04/12/2013 at 03:07 AM
Vote and respect the outcome.
Discussion 5 : 04/12/2013 at 02:50 AM
Exactly! That is why the government want to fight on until the very last breath claiming to "protect democracy". Ha
Discussion 6 : 03/12/2013 at 09:12 PM
The *protests* are the cause of the credit rating drop? But borrowing an unprecedented 4 TRILLION to build a very questionable train high-speed rail system, giving every kid an iPad, purchasing rice at double market rates, and racking up dangerous levels of household debts and non-performing loans somehow isn't to blame? The baht desperately needs to fall. Every one of Thailand's competitors (and neighbors) has cheaper labor now. With ASEAN around the corner, this will prove disastrous for Thailand's SME's.
Discussion 7 : 03/12/2013 at 09:08 PM
Time to stop holding the country hostage just because you don't agree with your political opponent.
Discussion 8 : 03/12/2013 at 08:02 PM
If the rallies don't cause the credit rating cut, the rice scheme and other wasteful spending will.
Discussion 9 : 03/12/2013 at 07:34 PM
Wow! PT will try anything to save their jobs. Credit Rating. Ha. Try Rice Scam disaster.
Discussion 10 : 03/12/2013 at 06:35 PM
If today is an example, the baht was falling, but somehow it was propped up. Is there currency manipulation going on by some Thai banks?
Discussion 11 : 03/12/2013 at 05:40 PM
It will also make money more expensive to borrow.
Discussion 12 : 03/12/2013 at 05:38 PM
That is hardly true government has caused this.they were warned months ago by Moody that the rice pledge was out of control and damaging the economy thus likely to cause a downgrade in Thailand's credit rating. Blame any one so long as it is not you..
Discussion 13 : 03/12/2013 at 04:51 PM
The rice pledging scam is the real reason... Not the protestors...
Discussion 14 : 03/12/2013 at 04:11 PM
Good News it will push the baht back to its logical value and stop the banking manipulation for a while anyway
Discussion 15 : 03/12/2013 at 03:59 PM
Certainly won't hurt those who pay no taxes, thus the government should't care at all, except for their own financial portfolios, but they are probably well taken care of via the rice pledging scheme and the high speed train system, and perhaps even the tablet policy or one car policy. You name it, corruption abounds.

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