News / Economy

Thailand's Political Turmoil Brings Economic Uncertainties

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.
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.
Ron Corben
Economists are warning of slower economic growth in Thailand while the country is gripped by political unrest. The U.S. ratings agency Fitch warns a prolonged political standoff could have a lasting negative impact on Thailand’s economic performance and financial stability.

In its report, Fitch pointed to a contraction in manufacturing, sharply lower retail sales growth, and consumer and business confidence at the lowest levels since the disastrous floods of late 2011.

The report followed weekend national elections that remain inconclusive and ongoing street protests by anti-government protesters. As the political conflict appears headed for the courts, foreign investors are voicing concern.

Investors looking elsewhere

President of Toyota Motor Corp in Thailand, Kyoichi Tanada, has warned long term investors may look to invest elsewhere such as Indonesia and Vietnam.

Chris Baker, an analyst and author on business in Thailand, says major foreign investors are fearful the inconclusive election, with by-elections and legal challenges to come, will unsettle investors.

"The major concern is about decision making they are getting worried; particularly the car makers and related industries," said Baker. "They are getting worried the government, that there's little chance in the near future of having a government that's going to be making serious decisions and this is a big disincentive for them."

Thailand’s caretaker government is currently under tight financial pressure to make payments to rice farmers, who are owed more than $3 billion under a controversial rice pledging scheme. The government has struggled to raise the funds and has been unable to secure funding from banks.

Foreign investors have been pulling back from the Thai stock market since political protests began in early November. The stock exchange index has shed 10 percent since then, although it has stabilized in recent days.

Despite the gloomy outlook, Andrew McBean, a partner with consultancy Grant Thornton Thailand, says the fact that Sunday’s elections were largely peaceful was a hopeful sign.

“There's some comfort from the weekend and the fact that it went without violence. What has emerged from this is quite a pragmatic business approach throughout the whole of it," he said. "Thailand continues to have a positive GDP [gross domestic product] - it continues to grow albeit not as well as its true potential."

Tourism has been hard hit especially in the capital Bangkok where the government instituted a state of emergency as anti-government protests moved to block key intersections in the city. More than 45 countries have issued travel alerts in recent weeks, and tourism authorities estimated losses for January alone at some $685 million.

The kingdom has weathered economic setbacks and political unrest before, earning it the name “Teflon Thailand.”  But many worry that the longer the political unrest continues, the longer it will take for the country to regain its tourist and business-friendly image.

  • Soldiers hold their shields as officials leave a government office where Prime Minster Yingluck Shinawatra had been holding a meeting as anti-government protesters gather outside in Bangkok, Feb. 3, 2014.
  • An anti-government protester carrying a national flag, a guitar and a "No Vote" sign follows others moving from one protest camp to another in Bangkok Feb. 3, 2014.
  • Voters hold their identification cards and the chains that held the gate of the polling station closed, as they demand the right to vote during general elections in Bangkok, Feb. 2, 2014.
  • Anti-government protest leader Suthep Thaugsuban waves to supporters during a march through Bangkok, Feb. 3, 2014.
  • Thai Prime Minister and Pheu Thai party leader Yingluck Shinawatra poses before casting her ballot in Bangkok, Feb. 2, 2014.
  • Thai soldiers pose with their identity cards as they wait in a line to vote at a polling station in Bangkok, Feb. 2, 2014.
  • Empty ballot boxes are shown before voting in Bangkok, Feb. 2, 2014.
  • Anti-government protesters check voting ballots they seized to disrupt elections before handing the papers back to officials after the general election in Hat Yai district, Songkhla province, southern Thailand, Feb. 2, 2014.

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Comment Sorting
by: Dr. Hairbottom from: USA
February 05, 2014 11:11 AM
Another diversion article by VOA, so as not to be concerned about the USA economy, and people ending up in FEMA camps. Let's get real, shall we?? As of January 2014 the average credit card debt in America stood at $15,279. The average mortgage debt is $149,925 and the average student loan debt load is $32,250. In total, Americans owe a staggering $11.36 trillion in debt and $856.9 billion in credit card debt. Census Bureau figures and polls, however, do not show the primary reason for declining incomes and the erosion of the middle class. Obama and the new Federal Reserve boss, Janet Yellen, say income inequality is a serious problem, yet they do not explain why and they never will.

The precipitous decline in middle class wealth is largely the fault of the Federal Reserve and government economic policy. The Federal Reserve enables deficit spending by government and fractional reserve lending by banks. It does this by creating money out of nothing. This influx of new money dilutes the value of existing currency and creates inflation. This represents an invisible tax government never talks about. “Unfortunately no one in Washington, especially those who defend the poor and the middle class, cares about this subject,” Ron Paul notes. “Instead, all we hear is that tax cuts for the rich are the source of every economic ill in the country. Anyone truly concerned about the middle class suffering from falling real wages, under-employment, a rising cost of living, and a decreasing standard of living should pay a lot more attention to monetary policy. Federal spending, deficits, and Federal Reserve mischief hurt the poor while transferring wealth to the already rich. This is the real problem, and raising taxes on those who produce wealth will only make conditions worse.”

The NBC News/Maris poll says most Americans believe the economy is getting better and their financial situation will improve. Unfortunately, there is little evidence to bear this out. So long as the Federal Reserve controls money, the situation will continue to get worse. The solution to income inequality and encroaching rates of poverty is not a tax on the rich. It is abolishing the Federal Reserve and eliminating the control the financial class on Wall Street has over the issuance of money.
In Response

by: Jeff McNeill from: Chiang Mai, Thailand
February 21, 2014 1:54 AM
Diversion article? What nonsense. There is a world outside of the United States. Not only is your economic analysis a joke, but your proposed solution would be a complete catastrophe. Thailand is hurting because of these so-called anti-government protestors, who are willing to crash the economy to wrest control of power from the Thai voters. Similar to what Dr. Hairbottom proposes.

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