Political turmoil threatens prospects of Thailand's floundering economy
By Orathai Sriring and Devjyot Ghoshal
BANGKOK, Aug 15 (Reuters) -The political turmoil unleashed by the dismissal of Thai Prime Minister Srettha Thavisin is likely to deal another blow to the already struggling economy, where millions of people drowning in debt have been waiting for long-delayed cash handouts.
Southeast Asia's second largest economy grew 1.5% in the first quarter of 2024 compared to a year earlier, slowing from the prior quarter's 1.7% expansion and lagging regional peers.
The tourism-dependent country of 66 million people has struggled to recover from the COVID-19 pandemic, and major growth engines, including an automobiles sector that is the largest in the region, are still spluttering.
Tim Leelahaphan, senior economist at Standard Chartered Bank, said the political upheaval had cast doubts about the passage of the 3.75 trillion baht ($107 billion) national budget for fiscal 2025, as well as the 500 billion baht nationwide cash handout that was a flagship Srettha policy.
"Political uncertainty and an unclear political outlook could have adverse implications for fiscal policy," he said. The caretaker deputy finance minister said on Thursday the budget would not be delayed.
Srettha's ouster by the constitutional court on Wednesday came a fortnight after his government opened registrations for a scheme to give away 10,000 baht to 50 millions Thais, a key election promise of his Pheu Thai party.
Over 16 million people had applied to receive the "digital wallet" handout on the day registrations opened, crashing the system but signalling huge demand for the controversial scheme among ordinary Thais hurting from the slowing economy and high levels of personal debt.
Household debt stood at 16.4 trillion baht, or 90.8% of GDP, at the end of March, among the highest in Asia.
The central bank, which had bickered with Srettha's administration over the scale of the handout, left its key interest rate THCBIR=ECI unchanged at a more than decade-high of 2.50% for a fourth straight meeting in June.
It is expected to hold the rate again when it meets on Aug. 21.
Ballooning household debt has also hit the car industry. Thailand is home to the factories of Toyota Motor 7203.T and Honda Motor 7267.T, and overall production in the sector has dropped for 11 straight months into June as local sales slumped.
Exports of car and car parts also dropped 0.4% in the first half of 2024 from a year earlier, with main markets Malaysia and Vietnam down nearly 30% on the year, commerce ministry data showed.
ENTRENCHED UNCERTAINTY
Srettha's removal underlines the deep fissures between the conservative-royalist establishment, backed by the military, and populist parties like the Pheu Thai. Both camps have been locked in a decades-long tussle, triggering coups and bouts of unrest.
In the absence of a lasting resolution to the conflict, Thailand's long-term prospects remain uncertain, analysts say.
"Thailand has still not found a formula to bridge the country's deep political divide," said Gareth Leather, Senior Asia Economist at Capital Economics.
"Without one, uncertainty looks set to remain entrenched while economic populism is likely to become worse, with negative repercussions for investor confidence."
Thailand's stock market .SETI has been the worst performing bourse in Asia so far this year, down 9.3%.
Industrial sentiment also hit its lowest in two years in June, while consumer confidence reached an 11 month low in July.
Parliament will convene on Friday to elect a new prime minister, less than 48 hours after Srettha's dismissal.
A Pheu Thai-led 11-party alliance holds 314 house seats, allowing it elect a prime minister on Friday, providing the coalition remains intact.
While on the streets Bangkok there is calm, analysts say the ongoing political drama could raise the risk of unrest. For now, some Thais are simply despondent.
"Just look at the economy now," said Wilai, 60, a book shop owner who gave only one name. "I think if politics continue like this, the economy won't be able to move forward."
($1 = 35.06 baht)
Additional reporting by Napat Wesshasartar in BANGKOK and Karin Strohecker in LONDON, Writing by Devjyot Ghoshal; editing by Miral Fahmy
Senaste nytt
Ansvarsfriskrivning: XM Group-enheter tillhandahåller sin tjänst enbart för exekvering och tillgången till vår onlinehandelsplattform, som innebär att en person kan se och/eller använda tillgängligt innehåll på eller via webbplatsen, påverkar eller utökar inte detta, vilket inte heller varit avsikten. Denna tillgång och användning omfattas alltid av i) villkor, ii) riskvarningar och iii) fullständig ansvarsfriskrivning. Detta innehåll tillhandahålls därför uteslutande som allmän information. Var framför allt medveten om att innehållet på vår onlinehandelsplattform varken utgör en uppmaning eller ett erbjudande om att ingå några transaktioner på de finansiella marknaderna. Handel på alla finansiella marknader involverar en betydande risk för ditt kapital.
Allt material som publiceras på denna sida är enbart avsett för utbildnings- eller informationssyften och innehåller inte – och ska inte heller anses innehålla – rådgivning och rekommendationer om finansiella frågor, investeringsskatt eller handel, dokumentation av våra handelskurser eller ett erbjudande om, eller en uppmaning till, en transaktion i finansiella instrument eller oönskade finansiella erbjudanden som är riktade till dig.
Tredjepartsinnehåll, liksom innehåll framtaget av XM såsom synpunkter, nyheter, forskningsrön, analyser, kurser, andra uppgifter eller länkar till tredjepartssajter som återfinns på denna webbplats, tillhandahålls i befintligt skick, som allmän marknadskommentar, och utgör ingen investeringsrådgivning. I den mån som något innehåll tolkas som investeringsforskning måste det noteras och accepteras att innehållet varken har varit avsett som oberoende investeringsforskning eller har utarbetats i enlighet med de rättsliga kraven för att främja ett sådant syfte, och därför är att betrakta som marknadskommunikation enligt tillämpliga lagar och föreskrifter. Se till så att du har läst och förstått vårt meddelande om icke-oberoende investeringsforskning och riskvarning om ovannämnda information, som finns här.
