BANGKOK Feb 5 Thailand's central bank warned on
Wednesday of "substantially increased" risk to economic growth
after the weekend's disrupted general election did nothing to
restore stability in the politically polarised country.
Protesters have been trying to topple Prime Minister
Yingluck Shinawatra since November, prompting the government to
announce a state of emergency ahead of Sunday's vote that was
boycotted by the main opposition party.
The ballot and the emergency order are being challenged in
the courts and there is no indication of how, or even if, an
election winner can be announced.
The Bank of Thailand's monetary policy committee (MPC)
warned of the effect of a prolonged crisis on Southeast Asia's
second-largest economy, which is heavily reliant on tourism.
The stock market has fallen more than 10 percent
since the start of November.
"The committee agreed that the downside risks to growth have
increased substantially," the panel said, according to the
minutes of a Jan. 22 meeting published on Wednesday.
"Growth impact could be more pronounced if a prolonged
unrest were to cause a switch of export orders to other
countries, with a potential knock-on effects on domestic
spending," it said.
The standoff, with bursts of violence in which 10 people
have been killed, is the latest round of an eight-year dispute
between Bangkok's middle class, southern Thais and the royalist
establishment against the mostly poor, rural supporters of
Yingluck and her brother, former prime minister Thaksin
Shinawatra. Thaksin was ousted by the military in 2006.
Tourism is taking a hit, infrastructure spending has stalled
and investors and consumers are uneasy.
At the Jan. 22 meeting, the committee slashed its economic
growth forecast for this year to around 3 percent from about 4
percent. A week later, central bank Governor Prasarn
Trairatvorakul said growth could be even lower than 3 percent
because the unrest had affected consumption and investment.
Economic data released since the MPC meeting show continuing
weakness. Factory output in December fell 6.1 percent from a
year earlier, and while exports that month were up 1.9 percent
on an annual basis, central bank indexes for consumption and
investment kept falling.
ALLEGATIONS OF CORRUPTION
Pressure on the government mounted on Tuesday, when a
flagship rice-buying scheme vital to its support stumbled closer
to collapse and the opposition filed legal challenges that could
void the weekend election.
The rice scheme helped sweep Yingluck to power in 2011 but
is now steeped in allegations of corruption, while growing
losses are making it increasingly hard to fund.
Political crises have not always been a drag on Thailand's
economy despite governments being toppled, protesters shot,
buildings set ablaze, and airports and shopping malls seized by
demonstrators over the past eight years.
Each time, Thailand's financial markets bounced back.
"The Thai economy has withstood the political rupture since
2006, and other shocks including large-scale flooding in late
2011," Fitch Ratings said.
GDP growth had averaged 2.9 percent between 2008 and 2013,
slightly higher than the average of 2.6 percent in comparable
countries, it said.
"Nonetheless, Fitch thinks political tensions are already
weighing on economic activity - evident from a contraction in
manufacturing output of around 7 percent year-on-year in the
fourth quarter of 2013."
The anti-government demonstrators, mostly from Bangkok and
the south, say Yingluck is Thaksin's puppet and the costly
giveaways that won his parties every election since 2001 are
tantamount to vote-buying using taxpayers' money.
They say Thaksin's new political order is tainted by graft
and cronyism and want an appointed "people's council" to replace
Yingluck and overhaul a political system hijacked by her
brother, who lives in exile to avoid a jail term for graft.
It was not all bad news for Yingluck.
The election, if not annulled by the courts, is almost
certain to renew her mandate, although it is unclear when
re-runs of disrupted votes will be held.
And the number of protesters on the streets has dwindled
since the election, allowing at least three government
ministries to resume work at their usual offices this week.
"We will slowly start to open government offices but some
state employees will have to keep working from back-up
locations," police spokesman Piya Utayo said.
"Not a single government office has had to stop working but
since these protests began they have had to change location."