“The recent occupation of the two airports in Bangkok by anti-government protesters has increased the risks to sovereign creditworthiness,” said Standard & Poor’s Singapore-based credit analyst Kim Eng Tan.

Tan said the closure of the airports had caused serious disruption to the economy and “raises the possibility of widespread violence markedly.”

The anti-government People’s Alliance for Democracy (PAD) last week raided and shut down Bangkok’s two international class airports - Suvarnabhumi International and Don Mueang - as part of their bid to bring down the administration of Thai Prime Minister Somchai Wongsawat.

Somchai has placed the two facilities under emergency decree and called on the police to clear the airports of the PAD protesters but authorities failed to act over the weekend.

The police are fearful that a bloody crackdown on the PAD would subject them to public criticism, and have hesitated to heed Somchai’s command because he may be disqualified as prime minister within days, political observers noted.

Meanwhile, both airports remained closed to air traffic on Monday, costing the country an estimated 3 billion baht (US$86 million) in undelivered exports and untold millions in damage to the country’s tourism sector, the leading foreign exchange earner.

Thailand’s political risks have risen since 2006 but, until recently, were not judged to have a material impact on sovereign credit fundamentals, the S&P said in a press statement released in Bangkok.

Despite a coup in 2006, an incompetent military-appointed government in 2007, and political upheaval in 2008, Thailand’s exports have performed well throughout, until October when they started to feel the impact of the financial meltdown in the U.S. and Europe.

Foreign exchange reserves have been maintained at a relatively strong level of US$105 billion, compared with projected nominal GDP of about US$280 billion in 2008, noted S&P.

The rating agency’s negative outlook on Thailand reflects its expectations that recent events have damaged medium-term economic growth prospects in the country amid fears of a heightened risk of widespread violence.