News / Economy

No Quick Rebound as Clouds Gather Over Thai Economy

FILE - A sign indicating the closure of a main touristic road can be seen next to barricades of anti-government protesters near a main stage of the protest in Bangkok, Feb. 5, 2014.
FILE - A sign indicating the closure of a main touristic road can be seen next to barricades of anti-government protesters near a main stage of the protest in Bangkok, Feb. 5, 2014.
Reuters
Any comfort investors in Thailand draw from what happened four years ago, when economic growth, the stock market and foreign investment all surged despite deadly unrest in Bangkok, may be sorely misplaced.
      
The latest bout of political strife will delay major government spending projects and damage a lucrative tourism industry. And, even if Thailand's politics calm down, its economy will remain handicapped by weak private investment and rising household debt.
      
“If you look at the channels through which politics impacts real economic activity, it's virtually every demand side component of GDP,” said Euben Paracuelles, senior economist at Nomura. “But, where I have a bigger worry is on private consumption and private investment.”
 
Data released on Monday showed the economy slowed sharply in the fourth quarter of 2013, when street protests aimed at bringing down Prime Minister Yingluck Shinawatra's Pheu Thai Party government first began.
 
Over-optimistic
 
The national planning agency slashed its growth forecast to 3-4 percent for 2014, from the 4-5 percent it was predicting in November, when the protests began building a head of steam. Some private sector economists think that is still over-optimistic.
         
“The longer the power vacuum lasts, the worse it will be for the Thai economy,” said Krystal Tan, Asia economist at Capital Economists, who doubts growth will top three percent this year.
 
“Spending restrictions on the caretaker government leave it with limited ammunition to boost the economy,” she added in a note.
 
As well as the big-ticket infrastructure items now facing delays, the government will also be unable to pursue the populist policies that brought Yingluck to power in 2011.
 
A controversial rice subsidy that has run into funding problems cannot be renewed when it expires this month, which will hit rural demand.
 
“Another major downside risk to growth from government spending is the inability to pay the rice farmers under the pledging scheme when many of them are already facing a liquidity problem,” said Santitarn Sathirathai, an economist at Credit Suisse in Singapore. “Even the cautious economists in the market, including ourselves, have not fully factored this issue in.”
 
This time it’s different
      
While 12 people have been killed in sporadic clashes between protesters, security forces and government supporters, the unrest has so far been less violent than during the country's last major spasm of street protests four years ago.
 
More than 90 people were killed in April and May 2010, but that year saw foreign direct investment jump 88 percent, the stock market surged 41 percent and the economy bounded ahead by 7.8 percent, its best performance in 15 years.
 
Back then China, the biggest market for the exports that make up 60 percent of the Thai economy, was roaring back from the global financial crisis at a stimulus-fuelled, double-digit clip, while domestic private investment was picking up.
 
Though it expanded 7.7 percent last year, China's growth narrowly missed a 14-year trough.
 
The chill for Thailand is even more evident in private investment, which fell 13.1 percent in the fourth quarter of 2013 from a year earlier. The National Economic and Social Development Board sees it rising just 3.8 percent this year.
 
In 2010, private investment rose nearly 14 percent.
 
Tourism, whose share of Thailand's economy has been grown in recent years to account for around 10 percent of GDP, has been suffering. Just last week, Starwood Hotels & Resorts Worldwide warned that political unrest had “significantly” hurt its business in January.
 
Of greater concern over the longer term is the rapid accumulation of debt by Thai consumers, who splurged on loans for house and car purchases in recent years.
 
Household debt is now equivalent to around 80 percent of GDP, up from 56 percent at end of 2008, and the Bank of Thailand warned this month it was likely to rise further as consumer loan growth may be faster than economic growth.
 
That is likely to depress consumer confidence, which dropped for a 10th straight month in January, even after the political crisis is resolved, and will limit the ability of the central bank to cut interest rates too far to prop up growth.
 
“When we get some kind of resolution, tourism tends to recover very quickly,” said Nomura's Paracuelles. “But what I would caution is that maybe the recovery is not going to be as quick from the private consumption side as previous episodes have suggested, because the difference now is we have very leveraged households, which are spending a lot of their disposable income just to service that level of debt.”

You May Like

Jihadist Assassin says Goal of Tunisia Murders Was Chaos

Abu Muqatil at-Tunusi’s remarks in a propaganda interview also cast light on attack on Bardo Museum More

Russia Denies License to Tatar-Language TV Station in Crimea

OSCE official says denial shows 'politically selective censorship of free and independent voices in Crimea is continuing' More

Kenyan Startups Tackle Expensive Remittances Through Bitcoin

Some think services could give Western Union a run for its money, though others say it’s still got a long way to go More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
For Obama, It's More Business Than Friendships With World Leadersi
X
Aru Pande
April 01, 2015 9:09 PM
The rift between President Barack Obama and Israeli Prime Minister Benjamin Netanyahu has put a spotlight on the importance of the American leader’s personal relationships with other world leaders and what role such friendships play in foreign policy. VOA's Aru Pande reports.
Video

Video For Obama, It's More Business Than Friendships With World Leaders

The rift between President Barack Obama and Israeli Prime Minister Benjamin Netanyahu has put a spotlight on the importance of the American leader’s personal relationships with other world leaders and what role such friendships play in foreign policy. VOA's Aru Pande reports.
Video

Video Buhari: Nigeria Has ‘Embraced Democracy’

Nigeria woke up to a new president-elect Wednesday, Muhammadu Buhari. But people say democracy is the real winner as the country embarks on its first peaceful handover of power since the end of military rule in 1999. VOA’s Anne Look reports from Abuja.
Video

Video Tiny Camera Sees Inside Blood Vessels

Ahead of any surgical procedure, doctors try to learn as much as possible about the state of the organs they plan to operate on. A new camera developed in the Netherlands can now make that easier - giving surgeons an incredibly detailed look inside blood vessels, all the way to the patient’s heart. VOA’s George Putic has more.
Video

Video Latin American Groups Seek Fans at Texas Music Festival

Latin American music groups played all over Austin, Texas, during the recent South by Southwest festival, and some made fans out of locals as well as people from around the world who had come to hear music. Such exposure can boost such groups' image back home. VOA’s Greg Flakus reports.
Video

Video Stockton Community, Police, Work to Improve Relations

Relations are tense between minority communities and police departments around the United States following police shootings that have generated widely-publicized protests. VOA's Mike O’Sullivan reports from Stockton, California, where police and community groups are working toward solutions, with backing from Washington.
Video

Video Indiana Controversy Highlights Divergent Meanings of Religious Freedom

Indiana’s state government has triggered a nationwide controversy by approving a law that critics say is aimed at allowing discrimination against gays and lesbians. The controversy stems from divergent notions of religious freedom in America. VOA's Jerome Socolovsky reports.
Video

Video Report: State of Black America a 'Tale of Two Nations'

The National Urban League has described this year's "State of Black America" report as a "tale of two nations." The group's annual report, released earlier this month (March), found that under an equality index African Americans had only 72% parity compared to whites in areas such as education, economics, health, social justice and civic engagement. It’s a gap that educators and students at Brooklyn’s Medgar Evers College are looking to close. VOA's Daniela Schrier reports from the school.
Video

Video Film Tells Story of Musicians in Mali Threatened by Jihadists

At this year's annual South by Southwest film and music festival in Austin, Texas, some musicians from Mali were on hand to promote a film about how their lives were upturned by jihadists who destroyed ancient treasures in the city of Timbuktu and prohibited anyone from playing music under threat of death. As VOA’s Greg Flakus reports from Austin, some are afraid to return to their hometowns even though the jihadists are no longer in control there.
Video

Video Ebola Vaccine Trials Underway in West Africa

Ebola has claimed the lives of more than 10,000 people in West Africa. Since last summer, researchers have rushed to get anti-Ebola vaccines into clinical trials. While it's too early to say that any of the potential vaccines work, some scientists say they are seeing strong results from some of the studies. VOA's Carol Pearson reports.
Video

Video Philippines Wants Tourists Spending Money at New Casinos

Tourism is a multi-billion dollar industry in the Philippines. Close to five million foreign visitors traveled there last year, perhaps lured by the country’s tropical beaches. But Jason Strother reports from Manila that the country hopes to entice more travelers to stay indoors and spend money inside new casinos.
Video

Video Civilian Casualties Push Men to Join Rebels in Ukraine

The continued fighting in eastern Ukraine and the shelling of civilian neighborhoods seem to be pushing more men to join the separatist fighters. Many of the new recruits are residents of Ukraine made bitter by new grievances, as well as old. VOA's Patrick Wells reports.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.

VOA Blogs

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

World Currencies

EUR
USD
0.9298
JPY
USD
120.21
GBP
USD
0.6773
CAD
USD
1.2675
INR
USD
62.497

Rates may not be current.