Ask Thai government officials and they will fume that it is just unfair. How can Thailand be denied an “A” sovereign credit rating when other countries with poorer macro-economic numbers already have that coveted assessment?
And for the Thais, the obvious comparison is with Malaysia.All three major rating agencies – Standard & Poor’s, Moody’s and Fitch – give Malaysia an A grade. Those same agencies put Thailand at the upper end of the B category, meaning that while Thai bonds are still rated investment grade, they are not regarded as being of the same quality as Malaysia’s.
Securing a high credit rating helps a country access cheap funding on international bond markets.
The macro-economic numbers, however, suggest otherwise. Thailand’s public debt stands at around 44 per cent of gross domestic product, significantly lower than Malaysia’s 53.7 per cent.
And while both countries have fiscal deficits, Malaysia’s is proportionately higher 4.5 per cent of GDP last year compared to that of Thailand 3 per cent. Both countries also hold international reserves equal to more than nine months of retained imports.The reality, however, is that such numbers are not the only factors rating agencies look at when making their assessments. Also considered is the impact of more subjective political variables.
While Malaysia certainly has its problems, the political impasse in Thailand seems far riskier.Thailand’s recent political history, involving military coups, constitutional change and deadly street clashes, cannot be ignored. Malaysia’s political difficulties will be dealt with at the ballot box in a couple of months; Thailand’s could easily be settled at the point of a gun.