New York-based rating agency Standard & Poor's yesterday warned Thailand that its sovereign credit ratings could soon be downgraded.
The AA rating credit for domestic currency debt and its A-rated foreign currency debt of US$3 billion for state and several financial institutions had been placed on a credit watch 'with negative implications', the agency said.
'Under a worse-case downgrade scenario, the long-term local and currency foreign currency ratings of the kingdom would fall no lower than to AA- and A-,' the agency said.
Standard & Poor's said its decision reflected 'greater-than-expected loan losses in the financial sector, which likely will impose a sizeable fiscal burden on the government and weakened economic growth in the next several years'.
The agency said the credit-watch status would be resolved over the next month following a review of the scale of problem loans in the finance sector and the financial stress on the corporate sector.
It would also review Thailand's reform programme agreed with the International Monetary Fund (IMF), due to be announced next week, and government restructuring plans.
The ratings agency placed eight Thai financial institutions on credit watch, citing concerns of non-performing loans and loan losses.