Latest protests could be hurting “Teflon Thailand”

Published on : Monday, January 13, 2014

“Teflon-Thailand”The nickname “Teflon Thailand” – an economy seemingly impervious to any lasting effects from regular spasms of violent political unrest seemed quite apt so far.

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 now seems more like a taunt.

Despite the fact that tourists returned to Thai beaches in near-record numbers, up 12 per cent that year 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.

Although Southeast Asia’s second-largest economy has proven surprisingly resilient to past
unrest, analysts see signs of deeper damage this time that could pose long-term problems for a country already grappling with slowing growth and outflows of global capital from its fragile financial markets.

The stock market .SETI is the worst performer in Southeast Asia and the currency THB= 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.

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 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 demonstrators.

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 four per cent from 5.1 per cent but said it could slip even lower, possibly to 3.5 per cent, if the unrest continued.

Credit Suisse expects even lower growth, of three per cent.

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