- POSTED: 16 Jan 2014 18:49
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The anti-government protests have so far been limited to the capital Bangkok and have not reached a point where they threaten the country's fiscal position.
SINGAPORE: Thailand's political unrest could slow down the economy but the current situation does not merit a ratings downgrade, credit rating agency Moody's said on Thursday.
The anti-government protests have so far been limited to the capital Bangkok and have not reached a point where they threaten the country's fiscal position, according to Moody's sovereign risk analyst Steffen Dyck.
"If political instability develops to a degree that these credit fundamentals really weaken deeply we will take a rating action," he said.
"Or if we see any deviation from fiscal discipline that will result in the massive widening of fiscal deficit and the ramp up in public debt, this will trigger a negative rating action," he added.
However Moody's, which has assigned Thailand a Baa1 rating with a stable outlook, raised concerns about the impact of the protests on the country's economic growth.
Tens of thousands of opposition protesters have occupied major streets in Bangkok since Monday in an attempt to "shut down" the capital and force Prime Minister Yingluck Shinawatra to quit.
Tourism, the government's planned infrastructure spending and overall economic growth could be hurt, said Dyck.
Moody's has slashed its gross domestic product (GDP) growth forecast for Thailand in 2013 to around 3.0 per cent from 3.7 per cent because of the impact of the protests in the final quarter of the year.
Dyck said the effect of the unrest is also likely to be felt in the first half of 2014, with Moody's projecting the Thai economy to grow 3-4 per cent instead of 4.5 per cent during the year.
This year's forecast "is subject to how long this protest drags on and how they develop because so far I think we've seen them very much confined to Bangkok", Dyck said.
"We don't see them affecting the airport... we don't see them disrupting the manufacturing and supply chain," he said.
Dyck said "political instability is not new to Thailand" and noted that even a coup in 2006 and political unrest in 2010 did not trigger a ratings downgrade from Moody's.
The firm had assigned a "negative" outlook for Thailand in 2008 when anti-government protesters occupied the capital's international airport for days.