Asia Briefing: Capital may shut but Thailand goes on
Every time you come to Thailand, you are struck by the vibrancy of the economy: bustling street markets, lots of shiny new luxury SUVs on the streets and a general buzz of anticipation about the expanding economy.
But since the current round of anti-government protests, which include this week’s shutdown of key areas of the city led by the People’s Democratic Reform Committee (PDRC), the Stock Exchange of Thailand main index has fallen more than 200 points, reducing market capitalisation by more than two trillion baht (€44.5 billion).
Thailand is an economy that seems able to function well with a high degree of instability, whether it’s a military coup or widespread street demonstrations.
Every time there is unrest in Thailand, analysts say this is the one that will turn over the apple cart, and every time its resilience comes to the fore.
The shutdown is already affecting tourism and it is leading to a delay in infrastructure spending.
The turmoil sent Thai consumer confidence to a two-year low in December, the ninth month in a row it had fallen.
The stock market is the worst performer in Southeast Asia and the currency has been falling since October.
Analysts are saying the unrest could pose genuine longer-term problems as Thailand tries to deal with a slowing economy and outflows of global capital from its fragile financial markets.
And the main chambers of commerce are also worried. The Federation of Thai Industries and the Thai Chamber of Commerce are both anxious about the shutdown.
The shutdown of Bangkok on January 13th by opposition leaders, part of their two-month-old attempt to topple prime minister Yingluck Shinawatra, is the latest incident to put pressure on the economy.
It seems like every year there is some event that rocks Southeast Asia’s second- biggest economy, and yet it still records high growth levels, which is why sometimes it’s called “Teflon Thailand”.
On December 26th, the Thai finance ministry cut its 2014 growth forecast to 4 per cent from 5.1 per cent and warned that it could fall even lower, possibly to 3.5 per cent, if the unrest continued.
Credit Suisse expects even lower growth, of 3 per cent.
In the past eight years, foreign journalists and rights activists have been shot, government buildings have been occupied and some of the city’s best-known shopping malls have been torched. But the resilience of the economy is remarkable.
In 2010, when the army cracked down on street protests with scores of deaths, foreign direct investment (FDI) nearly doubled, the stock market grew by 40 per cent and the economy grew 7.8 per cent, its best growth in 15 years.
The ruling Pheu Thai Party has said that the shutdown could cause more than 200 billion baht (€4.46 billion) in economic losses, while the leader of the anti-government protests, Suthep Thaugsuban, believes the shutdown will have only a minor impact on the economy. Bangkok accounts for one-third of Thai GDP and is the country’s only major city.
Pichai Naripthaphan, a former energy minister and a member of the Pheu Thai economic team, believes the opposition’s moves have severely affected business in Bangkok, particularly the capital markets.
Mr Pichai was responding to comments by Pramon Sutheewong, chairman of the business-based Anti-corruption Organisation of Thailand, who said the shutdown would not have much impact on the business sector.
At least 60 international flights into Bangkok have been cancelled and some foreign investors have already moved their investment bases from Thailand to neighbouring countries.
While the political uncertainty is affecting Bangkok, it doesn’t seem to be affecting the whole country.
It’s definitely having an impact on the tourist trade in Bangkok. Singapore Airlines has axed 19 flights to the capital because of the political unrest.
Travel agents are seeing a fall in bookings with people changing their destinations to Phuket as leisure travellers opt for destinations like Phuket in the south.
It is apparently hitting corporate travel, and meetings, incentives, conferences and exhibitions events.
The last airport shutdown damaged Thailand’s reputation as a holiday destination, and Mr Suthep said the airport and public transportation services would not be blocked during the shutdown, something that will come as a relief to the nation’s tour operators.