ASEAN KEY DESTINATIONS
Thai credit rating up, confidence lags
The key factors in Thailand remain its net external creditor position, prudent fiscal management, and relatively light net government indebtedness, said S&P. However, local consumer confidence fell for a second consecutive month in November after the country endured widespread flooding, cutting crop production. The baht's appreciation has started to affect exports and increase the cost of living.
The monthly index measuring consumer sentiment dropped to 79.0 last month from 80.2 in October, as consumers remain worried about the impact of floods and lower export growth on the economy. The index on the economy for November fell to 70.3 from 71.6, with future jobs and income also falling.
UTCC economist Thanavath Phonvichai said people were also concerned over higher living costs from higher prices for fuel and consumer products.
S&P projects Thailand's foreign-exchange reserves are likely to exceed US$170 billion [8.6 months of current account payments] by the end of 2010.
Thailand's low debt coupled with domestic financial costs (compared with peers in the 'BBB' category) has kept interest at a comfortable 5.3 percent of general government revenue, despite revenues forming 20.4 percent of GDP, which is low when compared with that of most other 'BBB' rated countries, it said.
Another weakness in credit fundamentals is non-performing assets (including restructured loans) that remain in the banking system, which weigh on the banks' financial performance.
"This is because of the inadequate legal and judicial framework on bankruptcy and resolution proceedings," said S&P. "The current legal infrastructure is not conducive to the healthy development of financial intermediation in the country."
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