Political vacuum 'damaging'

The Bangkok shutdown by anti-government protesters and the absence of a functional government could shave one percentage point off Thailand's economic growth, says an academic.

"Economic growth this year could come in below 2%, given that the political situation continues and there is no government in place," said Prof Bhanupong Nidhiprabha, the dean of Thammasat University's economics faculty.

Political problems have taken a toll on private consumption and foreign investors' confidence, both considered main drivers of economic growth.

All business sectors will likely be affected by the shutdown, particularly the service sector, as tourists cancel hotel bookings and people working in the transport industry earn less income.

The finance sector is also expected to take a hit, as the shutdown will cause the Stock Exchange of Thailand index to drop further, while commercial bank loans will decelerate due to rising uncertainty, said Prof Bhanupong.

The economy will remain in a slowdown cycle if political developments become more violent or a military coup occurs, he said, adding that a coup would tarnish the country's democratic development due to the Army's involvement in politics.

If the political situation returns to normal and there is an elected government, then gross domestic product growth may reach about 3%.

However, this depends on factors such as domestic consumption and export growth, he said.

Exports are seen as the main factor stimulating economic growth this year, but this is not sustainable because they rely on trade counterparts.

Although exporters can reap benefits from the weakening baht amid the economic recovery in Japan and the US, domestic political turmoil has dampened private consumption and investments, while the new government's fiscal policy is not expected to compensate for a decline in private spending immediately, said Prof Bhanupong

He said it is unnecessary for the Bank of Thailand to lower its policy interest rate further as it is already at a low level and another reduction could encourage more capital outflows.

The central bank's Monetary Policy Committee cut its benchmark interest rate to 2.25% from 2.5% late last November to help the lacklustre economy regain momentum.

However, a rate cut at its Jan 22 meeting is possible if the political situation gets worse or turns violent.

Share your thoughts

Discussion 1 : 11/01/2014 at 12:31 PM
you think discussions in Japanese board rooms about investment in Thailand is insignificant? I like your examples of Singapore and Taiwan where both invested heavily in education and now reap the benefits. But China (which includes HK): Corrupt, polluted police state with 'one child' policy,now growing much more slowly as they try to sort out corruption, banking system etc. Be careful what you wish for. Beijing or Bangkok? No contest.
Discussion 2 : 11/01/2014 at 11:50 AM
The loss of tourism dollar is so insignificant compared to the loss in country's growth under a corrupt regime. All you have to do is compare Thailand's economic standing to China, Taiwan, HK, Singapore and Malaysia. Then you know how far behind you have fallen
Discussion 3 : 11/01/2014 at 11:33 AM
Of course this damages the economy and ordinary people. Dont assume a new government will be less corrupt-just syphoning baht into different wallets. If Suthep has the Nation at heart, why do all this stuff in high season for tourism??
Discussion 4 : 11/01/2014 at 10:07 AM
we're better off with a percent of lower growth for a year compared with generations of debt as a result of puea thaksin regime.
Discussion 5 : 11/01/2014 at 09:57 AM
This is a joke isn't it? The damage to Thailand will only be for a short period due to the current political vacuum but how enormous would the damage be to the country if PT govern again withoutout reform, continue with the rice and water shams etc and then borrow the 2.2 trillion baht/
Discussion 6 : 11/01/2014 at 09:12 AM
Thailands growth was going to be zero this year regardless .

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