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

Egypt's Suez Canal Dreams Tempered by Continued Unrest

Seen as a potential driver of recovery, Cairo’s plan to expand waterway had been raising hopes to give country much needed economic boost More

Ebola Maternity Ward in Sierra Leone First of its Kind

Country already had one of world's highest maternal mortality rates before Ebola arrived, virus has added even more complications to health care More

Malaysia Flight 370 Disappearance Ruled Accident

Aircraft disappeared on March 8, 2014; with ruling, families of 239 passengers and crew can now seek compensation from airline More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Groundbreaking Hand-Painted Documentary About Van Gogh in Productioni
X
George Putic
January 29, 2015 9:43 PM
The troubled life of the famous 19th century Dutch painter Vincent van Gogh has been told through many books and films, but never in the way a group of filmmakers now intends to do. "Loving Vincent " will be the first ever feature-length film made of animated hand-painted images, done in the style of the late artist. VOA’s George Putic reports.
Video

Video Groundbreaking Hand-Painted Documentary About Van Gogh in Production

The troubled life of the famous 19th century Dutch painter Vincent van Gogh has been told through many books and films, but never in the way a group of filmmakers now intends to do. "Loving Vincent " will be the first ever feature-length film made of animated hand-painted images, done in the style of the late artist. VOA’s George Putic reports.
Video

Video Rock-Consuming Organisms Alter Views of Life Processes

Scientists thought they knew much about how life works, until a discovery more than two decades ago challenged conventional beliefs. Scientists found that there are organisms that breathe rocks. And it is only recently that the scientific community is accepting that there are organisms that could get energy out of rocks. Correspondent Elizabeth Lee reports.
Video

Video Paris Attacks Highlight Global Weapons Black Market

As law enforcement officials piece together how the Paris and Belgian terror cells carried out their recent attacks, questions are being asked about how they obtained military grade assault weapons - which are illegal in the European Union. As VOA's Jeff Swicord reports, experts say there is a very active worldwide black market for these weapons, and criminals and terrorists are buying.
Video

Video Activists Accuse China of Targeting Religious Freedom

The U.S.-based Chinese religious rights group ChinaAid says 2014 was the worst year for religious freedom in China since the end of the Cultural Revolution. As Ye Fan reports, activists say Beijing has been tightening religious controls ever since Chinese leader Xi Jinping came to office. Hu Wei narrates.
Video

Video Super Bowl Ads Compete for Eyes on TV, Web

Super Bowl Sunday (Feb. 1) is about more than just the NFL's American football championship and big parties to watch the game. Viewers also tune in for the world famous commercials that send Facebook and Twitter abuzz. Daniela Schrier reports on the social media rewards for America’s priciest advertising.
Video

Video Theologians Cast Doubt on Morality of Drone Strikes

In 2006, stirred by photos of U.S. soldiers mistreating Iraqi prisoners, a group of American faith leaders and academics launched the National Religious Campaign Against Torture. It played an important role in getting Congress to investigate, and the president to ban, torture. VOA's Jerome Socolovsky reports.
Video

Video Freedom on Decline Worldwide, Report Says

The state of global freedom declined for the ninth consecutive year in 2014, according to global watchdog Freedom House's annual report released Wednesday. VOA's William Gallo has more.
Video

Video MRI Seems to Help Diagnose Prostate Cancer, Preliminary Study Shows

Just as with mammography used to detect breast cancer, there's a lot of controversy about tests used to diagnose prostate cancer. Fortunately, a new study shows doctors may now have a more reliable way to diagnose prostate cancer for high risk patients. More from VOA's Carol Pearson.
Video

Video Smartphones About to Make Leap, Carry Basic Senses

Long-distance communication contains mostly sounds and pictures - for now. But scientists in Britain say they are close to creating additions for our smartphones that will make it possible to send taste, smell and even a basic touch. VOA’s George Putic reports.
Video

Video Former Sudan 'Lost Boy' Becomes Chess Master in NYC

In the mid-1980’s, thousands of Sudanese boys escaped the country's civil war by walking for weeks, then months and finally for more than a year, up to 1,500 kilometers across three countries. The so-called Lost Boys of the Sudan had little time for games. But one of them later mastered the game of chess, and now teaches it to children in the New York area. VOA’s Bernard Shusman in New York has his story.
Video

Video NASA Monitors Earth’s Vital Signs From Space

The U.S. space agency, NASA, is wrapping up its busiest 12-month period in more than a decade, with three missions launched in 2014 and two this month, one in early January and the fifth scheduled for January 29. As VOA’s Rosanne Skirble reports, the instruments being lifted into orbit are focused on Earth’s vital life support systems and how they are responding to a warmer planet.
Video

Video Crowded Republican Presidential Field Off to Early Start for 2016

It seems early, but the 2016 U.S. presidential election campaign is already heating up. Though no one has officially announced a candidacy, several potential Republican contenders have been busy speaking to conservative groups about making a White House run next year. Many of the possible contenders are critical of the Obama administration’s foreign policy record. VOA national correspondent Jim Malone reports.

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

All About America

AppleAndroid

World Currencies

EUR
USD
0.8837
JPY
USD
117.92
GBP
USD
0.6608
CAD
USD
1.2531
INR
USD
61.900

Rates may not be current.