S&P cuts Thai local rating, keeps negative outlook

HONG KONG, April 14 - Standard & Poor's lowered Thailand's domestic currency rating to A-minus from A and kept its outlook on negative blaming the country's worsening political crisis which it said was a threat to its financial stability.

The agency also affirmed Thailand's BBB-plus foreign currency rating with a negative outlook.

"We believe that investor confidence has been damaged significantly," the agency said in a statement referring to the three week anti-government protests which ended on Tuesday.

For a full statement click on [ID:n4467]

"Thailand has been considered an attractive investment destination in recent years, but investors are now likely to factor in the negative implications of political uncertainty in making their decisions," it said.

In Bangkok, protestors ended the three-week siege of the prime minister's office on Tuesday, stepping back from a confrontation that had raised fears that renewed instability would further damage the economy. [ID:nSP463284]

S&P said Thailand's credit rating was supported by factors such as its net external creditor position, prudent fiscal management and low government debt.

The agency forecast Thai foreign exchange reserves would rise to $130 billion by end-2009, larger than the projected external debt of $70 billion.

But it said that political uncertainties had become a key credit weakness in recent years, with abrupt government changes and street protests having begun to cause significant economic disruptions.

"Indications of a serious and sustained worsening of fiscal and economic indicators could trigger a downgrade of the sovereign credit ratings," it said.

But on the contrary, S&P said the outlook could revert to stable in case of a strong revival of investor confidence which would in turn depend on signs the stability in Thailand's domestic political situation is a sustained one.