Asia Briefing: Fitch holds to ratings for ‘Teflon’ Thailand

Fitch Ratings has maintained its view on "Teflon Thailand", currently embroiled in yet another stand-off played out on the streets of Bangkok between protesters backed by middle-class monarchists and the ruling democratically elected government of Yingluck Shinawatra, sister of deposed prime minister Thaksin Shinawatra.

"We have seen repeated political disturbances stretching back to the mid-2000s . . . without a clearly identifiable negative impact on the performance of the economy or on financial or banking-system stability," Andrew Colquhoun, head of Asia-Pacific sovereigns at Fitch Ratings, told Bloomberg TV last week, saying how the agency looked "through the current political noise".

But while the broader outlook remains positive, even if the military eventually intervenes and there is more bloodshed, the economy will not escape unharmed; there are gathering signs that concern about political unrest has caused the baht to weaken and has increased capital volatility.

Thailand’s finance ministry expects growth of 3.1 per cent this year, which is down nearly one percentage point from the 4 per cent forecast on December 26th, in turn already down from an original forecast of 5.1 per cent.

A survey by Bloomberg of eight economists also showed Thailand probably will cut its benchmark interest rate for a second straight meeting this week.

The Bank of Thailand will cut its one- day bond repurchase rate by a quarter of a percentage point to two per cent in a decision due tomorrow, according to seven of eight economists.

This all depends if they can physically get in to work to do the deed – employees of the Bank of Thailand have not been able to work at their normal offices because of a lockdown of the Thai capital.

It would also hit investment, finance minister Kittiratt Na-Ranong said, as the government has been unable to continue its two trillion baht (€40 billion) infrastructure spending plan.

Tourism is always a big earner in the “Land of Smiles”. Passing through Bangkok’s Suvarnabhumi international airport last week, it seemed relatively light on people, with passenger numbers down to 129,000 a day on January 14th from a daily average of 152,000 between January 1st and 12th, according to Airports of Thailand. The number of flights dropped 6.9 per cent, as Singapore Airlines, Cathay Pacific Airways and some Chinese airlines cut back.