BANGKOK Jan 10 It has been nicknamed "Teflon
Thailand" - an economy seemingly impervious to any lasting
effects from regular spasms of violent political unrest.
But with protesters vowing to "shut down" Bangkok on Jan. 13
in their two-month-old bid to topple Prime Minister Yingluck
Shinawatra, the nickname seems more like a taunt.
For while Southeast Asia's second-largest economy has proven
surprisingly resilient to past unrest, analysts see signs of
deeper damage this time that could pose longer-term problems for
a country already grappling with slowing growth and outflows of
global capital from its fragile financial markets.
Tourism is taking a hit, infrastructure spending is delayed
and investors and consumers are uneasy over a political crisis
that promises more violence but no real solution.
The stock market is the worst performer in Southeast
Asia and the currency has been falling since October.
"It's clear the economy is slowing down and you cannot rely
on fiscal policy any more because we don't really have a
government right now," said Kampon Adireksombat, senior
economist at TISCO Securities in Bangkok.
The turmoil sent Thai consumer confidence to a two-year low
in December, a ninth straight month of decline, a survey showed
on Thursday, and the trend is likely to continue. Consumer
spending propped up the economy when exports were weak in 2012
The government's planned infrastructure investments will be
postponed until the next budget year, which begins in October,
Finance Minister Kittirat Na Ranong said on Jan. 3. But with a
new administration unlikely to be put in place soon, the plans
could be delayed further.
"It is very clear the infrastructure project is unlikely to
be implemented this year," said Kampon at TISCO.
Political turbulence is not always a drag on Thailand's
economy, which has weathered eight years of on-off turmoil that
has seen governments toppled, protesters shot, buildings and
buses set ablaze, and airports and shopping malls seized by
Each time, Thailand's financial markets typically swoon and
rebound. The bloodiest political violence in a generation
erupted in April and May 2010, but foreign inflows nearly
doubled that year; stocks rocketed 40.6 percent and the economy
bounded ahead by 7.8 percent, its best growth in 15 years.
Tourists returned to Thai beaches in near-record numbers, up
12 percent that year.
But the current crisis is dragging on longer, entering a
third month, with no end in sight. As each week passes amid
speculation of a possible military coup, economists and
policymakers are chopping more off their growth forecasts for
Thailand's $360 billion economy.
On Dec. 26, the Finance Ministry slashed its 2014 growth
forecast to 4 percent from 5.1 percent but said it could slip
even lower, possibly to 3.5 percent, if the unrest continued.
Credit Suisse expects even lower growth, of 3 percent.
A general election is scheduled for Feb. 2, but with an
opposition boycott and hundreds of ruling party lawmakers now
under investigation for corruption, it is looking increasingly
unviable. The Election Commission said the vote will take place,
although fears remain it could be derailed by street violence or
yet another military coup.
Until an election is held, Thailand will be run by
Yingluck's caretaker government, which will have neither the
power nor the inclination to implement growth-boosting policies,
If a government is elected, it will likely prioritise
political survival over fiscal policy. The worst-case scenario,
says Sutapa Amornvivat, chief economist at Siam Commercial
Bank's Economic Intelligence Center, is a non-functioning
government in which "public investment practically shuts down".
Failure to hold an election will also hurt the fiscal 2015
budget allocation, warned Manas Jamveha, director-general of the
Comptroller General's Department. He said he expected a
four-month delay in planning the 2015 budget if elections are
"SAME SAME BUT DIFFERENT"
Since 2006, when Yingluck's brother Thaksin was toppled as
prime minister by a military coup, Thailand has experienced
popular uprisings and bloody crackdowns.
But this time could be - to borrow a phrase from a T-shirt
sold to tourists - "same same but different".
Unlike in 2010, the economy is much more reliant on tourism
and infrastructure spending, both of which are taking a hit.
Tourism revenues account for 10 percent of GDP, so any
impact on the sector "should be significant to economic growth,"
said Pimonwan Mahujchariyawong, an economist at Kasikorn
Thailand is now in its peak tourist season, unlike during
the 2010 unrest. In December, tourist arrivals increased by only
6.7 percent over a year earlier, an alarming figure for an
industry accustomed to years of double-digit growth. Arrivals
jumped more than 30 percent in December 2012.
Airlines have cancelled scores of flights to Bangkok and
some hotels are half-empty. Usually occupancy rates during the
peak tourist season are more like 80-90 percent, said Piyaman
Tejapaibul, president of the Tourism Council of Thailand.
"People are afraid to have meetings or seminars here. There
have been a lot of cancellations or postponements," said
Ronnachit Mahattanapreut, senior vice-president of the Central
Plaza Hotel Pcl.
The hotel group's occupancy rates have dropped to 40-50
percent since December, compared with 60-70 percent a year
earlier. "The main factor is the unrest," said Ronnachit.
Nor is the weak baht - down about 6 percent against
the dollar since the start of November - helping Thai exporters
much, said SCB's Sutapa.
"A lot of private firms are on wait-and-see mode, including
exporters who were expecting (business) to pick up with the
global recovery," said Sutapa.
Periodic political violence has become "the new normal" for
Thailand, but talk of the economy's resilience obscures a
greater malaise, said SCB's Sutapa.
Unrest does not seem to dent the economy, she says, until
you factor in almost a decade of lost opportunities.
"All this time private investment is much lower as a share
of GDP compared to our neighbouring countries," she said. "If
you look at that, you can definitely see that without political
unrest, possibly our economy would be growing much faster."