Fitch optimistic about Thailand’s economy and politics

A top executive at Fitch Ratings expressed a favorable view last week on Thailand’s creditworthiness, short-term economic prospects, and political stability, adding that the agency could raise the Kingdom’s ratings in the coming years if it maintains its strong fundamentals.

James McCormack, managing director and global head of sovereign and supranational ratings at Fitch, told a conference in Bangkok that his organization could raise Thailand’s BBB+ sovereign rating within 12 to 24 months if sound policies, solid fundamentals, and political stability continue.

“I think Thailand crossed a political threshold with its election and stable return to democratic governance,” McCormack said.

His optimistic economic outlook stands in contrast to those of some economists, banks, and analysts who are more pessimistic about the Kingdom’s prospects because of global trade tensions and a global fall-off in exports. Exports drive Thailand’s economy. Adding to Thailand’s woes has been the steady rise of the value of its currency, the baht, against the dollar, making Thai goods more expensive overseas.

McCormack acknowledged that Thailand’s current account surplus was causing upward movement in the baht, and that could be harming export totals in the near term. Longer-term, however, a strong baht may not be as harmful as some think.

“The simple assumption that a weaker currency helps exports is not always correct,” McCormack said.

While emerging economies with a weakening currency often experience growth in export volumes, McCormack said that Fitch research shows that the dollar value of their exports goes down. Fitch puts great importance on dollar value when assigning ratings, as the dollar can be used to pay off debt, he said.

The dollar value of Thailand’s exports could increase, even while export volume could decline.

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