BANGKOK— Thai military and business groups hope to revive the country’s battered economy, now in recession due in large part to more than six months of political turmoil and violent protests.
In a step aimed at winning public support and bolstering the economy, the military government this week moved quickly to pay some $3 billion in overdue payments to some 800,000 rice farmers.
The money is from a controversial scheme by the former Pheu Thai Party-led government that paid above market prices for rice. Opposition groups had charged the rice price support scheme was abused and open to corruption. The government struggled to make payments last year as its coffers ran dry.
Asian Development Bank (ADB) senior economist Luxman Attapich said restoring confidence, and making the payments to farmers was a key step to short term economic recovery.
"We need both consumer confidence and investor confidence. At least paying of obligation to rice farmers is a good sign that this administration is honoring all the obligations of the previous government. And when farmers receive income it helps their multiplying (spending) effects into consumption. So that is good for the economy," said Luxman.
The Thai economy has slipped into recession in recent months as the political conflict drained confidence amid ongoing street protests and growing fears among investors and tourists that violence could escalate.
The military government says it is banking on political and economic reforms to stabilize the country before elections return the country to democratic rule. No time table for a new poll has been set.
But major industry groups this week set out plans to reform the economy reduce economic inequalities and address corruption and regulatory reforms.
Supavud Saicheua, an economist and director of Phatra Securities, said the economy should revive over the coming months with growth moving to around two percent by the end of 2014. But Supavud said political stability was the key to longer term recovery.
"Medium term I think you do still have to find political stability that comes from reconciliation. And we still don't know how that reconciliation process will proceed and how successful it will be. Foreign investors are cautious, given Thailand has had a history of political divisions that have deepened and that's why we needed the coup," he said.
Vikas Kawatra, a senior analyst with investment brokerage house SCB Securities, said despite talk of reform, foreign investors were still adopting a "wait and see" approach on how events will unfold. Thailand has faced 19 coups or coups attempts since it became a constitutional monarchy in 1932.
"To foreigners they are still looking at it as a drill. We'll go the motions; year, year and a half and things will look good, slightly better than they are today. [But] I don't think anyone is expecting the elected or non-elected government - to make any radical changes to the entire process," he said.
Under the changes announced this week by the military government included a new policy advisory body of technocrats and bankers to oversee security, the economy and the law.