World Bank warns of debt rollover risk in Indonesia, Thailand

Foreigners have pulled more than 200 billion baht of equity investments from Thailand this year. (Post Today photo)

Any increase in capital outflows could make it more difficult for companies and governments to refinance foreign debt in developing East Asia, with Indonesia and Thailand most at risk, says the World Bank.

Outflows pose “potentially disruptive implications for business operations and solvency on the corporate side, and for deficit financing and debt sustainability on the sovereign side,” the World Bank said in a report on Thursday. The threat of bankruptcies in Indonesia and Thailand is limited though, it said.

Foreigners have pulled a net $6.6 billion (215 billion baht) of equity investments from Thailand this year and almost $3.7 billion from Indonesia.

“Rollover risks are potentially acute for Indonesia and Thailand, given their sizable stocks of short-term debt,” it said. “However, it is unlikely that liquidity risk would translate into solvency risk in these countries, given their relatively low levels of foreign debt, strong financial sector capital adequacy and liquidity, and ample monetary and fiscal buffers.”

In new forecasts released on Thursday, the World Bank cut its 2018 economic growth projections for Indonesia, Malaysia, and the Philippines, while estimates for Thailand and Vietnam were raised.