What the credit rating agency, Moody, currently thinks of Thailand

The following is from Moody:

DECEMBER 12, 2013

Thailand’s Early Elections Will Not Resolve Its Deepening Political Crisis

Credit Outlook

Last Monday in Thailand (Baa1 stable), Prime Minister Yingluck Shinawatra announced that the House of Representatives, the lower house of parliament, had been dissolved, and that new elections were scheduled for 2 February 2014. The move followed a mass resignation of members of parliament from the opposition Democrat Party on Sunday. In our view, dissolution of parliament and early elections will not resolve Thailand’s political crisis, a credit negative.

It remains unclear whether the Democrat Party will participate in the election. And, given the strong electoral support that Ms. Yingluck’s Pheu Thai Party enjoys, early elections are unlikely to change current majorities in par liament. Thailand will face continued anti-government protests because protesters do not accept a democratic system based on majority rule by its opponents.

The leader of the anti-government protesters, Suthep Thaugsuban, has said that the dissolution of parliament and early elections are insufficient measures. Rather, his stated goal is to topple the “Thaksin regime” and replace it with a royally appointed council, an outcome that holds no promise of resolving the deep political divide and turbulent political developments that have played out in Thailand between the royalist Democrat Party and the various manifestations of the populist Pheu Thai Party over the past six years.

If the opposition Democrat Party does not participate in the February elections, it could consequently lead the Constitutional Court to declare the election outcome invalid, similar to events that occurred in 2006.

As we had stated last week, the key credit-negative feature for the sovereign is that prolonged protests will weigh on an already fragile growth outlook for 2014. In addition, heightened political tensions have marred investor confidence, as reflected in the accelerated decline in Thailand’s official foreign exchange position since late October (Down from about US$170 billion to US$150 billion).


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