TRIS has assessed how the terrorist attacks on the United States have effected the Thai economy as well as the businesses it rates. In a report released today, TRIS concluded that in the short term, the Thai economy has not suffered as much as the United States and some countries. However, the consequence will be more concrete by the last quarter of 2001 and beginning of 2002. All credit ratings assigned by TRIS remain the same, but the situation is still being closely monitored since prolonged fighting in Afghanistan and a worldwide recession would put more pressure on domestic businesses. Therefore, the year-end performances of TRIS's clients need to be examined.
Dr. Warapatr Todhanaksem, the President of Thai Rating and Information Services Co., Ltd. (TRIS), announced the assessment on 12 November 2001, two months after the terrorist attacks on the United States that lead to military actions in Afghanistan. The assessment looks at the impact of the attacks on the Thai macroeconomy and the status of the credit ratings TRIS has assigned. TRIS's President said that the impact to the Thai economy is not as severe as its Asian neighbor like Singapore. Thai industries suffering the most from the consequences of the attacks are exports, international transportation and tourism. TRIS expects GDP growth for 2001 to be not higher than 1.3%, while exports will contract by as much as 8% from a year earlier. TRIS's President said that the attacks and the fighting in Afghanistan should not have a direct impact on the performance of financial institutions in Thailand in the short term. However, the possibility of a prolonged domestic economic slowdown and the negative prospects of some businesses, especially those that depend on exports to the United States and tourism, cause concern that non-performing loans (NPLs) in the Thai financial system will not be reduced as earlier planned. TRIS anticipates that total financial institution's NPLs to total loans will be between 10% and 13% at the end of 2001.
Based on the severity of the impact of the terrorist attacks and fighting in Afghanistan, TRIS's President said that its rated businesses are catergorized into three groups:
1) Immediately-effected Businesses covers the Polyvinyl Chloride (PVC) Business the prices of which have been lower than expected, while raw material prices are volatile; Export-related Industries, especially shrimp that will suffer from decreased offshore demand; and Aeronautical Services, which might suffer from the downturn in air traffic and air transportation demands.
2) Medium-effected Businesses include Banks and Finance Companies, which were already suffering with NPLs from the economic slowdown of 1997. Thus the impact from the attacks and fighting in Afghanistan will put more pressure on their loan borrowers in export industries and borrowers who rely on tourism. Such pressure could generate more NPLs in the medium term; Auto Leasing Companies, already experiencing diminishing growth rate of new car sales, may suffer from a further drop in car demand; Retail Property Companies have been able to raise revenue as planned, but the impact from the attacks and economic recession could affect consumer behavior and demand to spend; and Media Companies were already seeing declining demand for advertising because of the economic slump, and further economic slowdown after the attacks will be a negative factor for advertising demand.
3) Less-effected Businesses are the industries that are protected against risks from demand and price volatility, such as the Energy Sector. Most clients of TRIS in this sector have signed long-term contracts with the national oil and gas company to purchase their production; Telecommunication Companies have enjoyed continuously good performances, especially mobile phone companies.
The companies will continue to benefit from the relatively low price of mobile phones and the high subscriber growth potential in the market. However, competition in telecoms is expected to increase next year due to more players. The last business in this category is Basic Food Producers that have low-price products and high domestic consumption, such as broilers and chicken parts.
TRIS's President said that the industry assessment was done only for the companies rated by TRIS. The effects of the terrorist attacks and fighting in Afghanistan on other operators in the same industries may differ due to different operational conditions and management quality.
TRIS's President also emphasized that even though TRIS has not yet changed the ratings of its clients at the moment, but it is still important to monitor closely the consequences of the conflict between the US government and the terrorists. If the fighting is prolonged and turns to be more serious than expected, and if these circumstances are likely to have impact on the performances of the companies rated by TRIS, rating actions may take place and TRIS will announce rating changes as appropriate. -- End
Dr. Warapatr Todhanaksem, the President of Thai Rating and Information Services Co., Ltd. (TRIS), announced the assessment on 12 November 2001, two months after the terrorist attacks on the United States that lead to military actions in Afghanistan. The assessment looks at the impact of the attacks on the Thai macroeconomy and the status of the credit ratings TRIS has assigned. TRIS's President said that the impact to the Thai economy is not as severe as its Asian neighbor like Singapore. Thai industries suffering the most from the consequences of the attacks are exports, international transportation and tourism. TRIS expects GDP growth for 2001 to be not higher than 1.3%, while exports will contract by as much as 8% from a year earlier. TRIS's President said that the attacks and the fighting in Afghanistan should not have a direct impact on the performance of financial institutions in Thailand in the short term. However, the possibility of a prolonged domestic economic slowdown and the negative prospects of some businesses, especially those that depend on exports to the United States and tourism, cause concern that non-performing loans (NPLs) in the Thai financial system will not be reduced as earlier planned. TRIS anticipates that total financial institution's NPLs to total loans will be between 10% and 13% at the end of 2001.
Based on the severity of the impact of the terrorist attacks and fighting in Afghanistan, TRIS's President said that its rated businesses are catergorized into three groups:
1) Immediately-effected Businesses covers the Polyvinyl Chloride (PVC) Business the prices of which have been lower than expected, while raw material prices are volatile; Export-related Industries, especially shrimp that will suffer from decreased offshore demand; and Aeronautical Services, which might suffer from the downturn in air traffic and air transportation demands.
2) Medium-effected Businesses include Banks and Finance Companies, which were already suffering with NPLs from the economic slowdown of 1997. Thus the impact from the attacks and fighting in Afghanistan will put more pressure on their loan borrowers in export industries and borrowers who rely on tourism. Such pressure could generate more NPLs in the medium term; Auto Leasing Companies, already experiencing diminishing growth rate of new car sales, may suffer from a further drop in car demand; Retail Property Companies have been able to raise revenue as planned, but the impact from the attacks and economic recession could affect consumer behavior and demand to spend; and Media Companies were already seeing declining demand for advertising because of the economic slump, and further economic slowdown after the attacks will be a negative factor for advertising demand.
3) Less-effected Businesses are the industries that are protected against risks from demand and price volatility, such as the Energy Sector. Most clients of TRIS in this sector have signed long-term contracts with the national oil and gas company to purchase their production; Telecommunication Companies have enjoyed continuously good performances, especially mobile phone companies.
The companies will continue to benefit from the relatively low price of mobile phones and the high subscriber growth potential in the market. However, competition in telecoms is expected to increase next year due to more players. The last business in this category is Basic Food Producers that have low-price products and high domestic consumption, such as broilers and chicken parts.
TRIS's President said that the industry assessment was done only for the companies rated by TRIS. The effects of the terrorist attacks and fighting in Afghanistan on other operators in the same industries may differ due to different operational conditions and management quality.
TRIS's President also emphasized that even though TRIS has not yet changed the ratings of its clients at the moment, but it is still important to monitor closely the consequences of the conflict between the US government and the terrorists. If the fighting is prolonged and turns to be more serious than expected, and if these circumstances are likely to have impact on the performances of the companies rated by TRIS, rating actions may take place and TRIS will announce rating changes as appropriate. -- End