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Thai protests jeopardise 2014 growth: Moody's

Publication Date : 02-12-2013

 

The protests in some parts in Thailand will likely undermine investor confidence and detract from an already fragile growth outlook for 2014, according to Moody's Investors Service.

In a statement, the rating agency noted that although protests have mostly been peaceful, prolonged or escalating protests will adversely affect foreign investment and tourism, and exacerbate delayed public infrastructure investment.

"… which will weigh on Thailand's future growth in 2014 and beyond. While Thailand's credit fundamentals still compare favourably with similarly rated peers, weaker growth will negatively affect the fiscal balance and contribute to rising debt ratios," it said.

Since US tapering fears emerged in May 2013, emerging market countries with relatively weak policy frameworks or external current account and domestic budget deficits have had more volatile capital flows. Thailand has become more vulnerable to diminished investor confidence because it has these twin deficits. And, its foreign exchange reserves have declined since May.

Thailand's growth momentum is also slowing: third-quarter real GDP growth declined to 2.7 per cent year on year from 5.4 per cent in the first quarter.

This contrasts with Korea, Malaysia and Singapore, which all reported stronger third-quarter annual growth rates.

"Although slowing growth also reflects the strong base effects of a growth rebound in first half 2012, as a result of post-flood reconstruction and government stimulus measures, we also see indications of underlying structural weaknesses, with weak export growth in key manufacturing sectors, such as automotive, electronics, and agro-manufacturing. Overall, export growth for the 10 months through October was stagnant and momentum lags that of other open economies in the region," it said.

 

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