Are the red shirts hurting the economy?

2 04 2010

The claim that the red shirt protests are hurting the Thai economy is one that the government has been promoting, along with its supporters, and is now a common refrain from the yellow-cum-pink shirts. Interestingly, the international media reflects on this in two recent articles.

The Washington Post (2 April 2010) has this to say, citing Joseph Tan, chief Asia economist at Credit Suisse: “While not reflected in stock prices, the political crisis shows up in foreign direct investment, which cuts into long-term economic growth. Thailand’s Board of Investment, for instance, expects investment pledges this year to fall 15 percent.” PPT would put much of that down to Map Tha Phut issues rather than political activism.

It adds: “Chief among Tan’s concerns is the timing of the protests coinciding with the hospitalization of 82-year-old King Bhumibol Adulyadej, admitted on September 19 suffering from fever, fatigue and loss of appetite. TV footage suggests his health has improved, but his hospitalization focuses attention on royal succession.  His son and presumed heir, Crown Prince Maha Vajiralongkorn, does not yet command the same popular support as his father. Many Thais and analysts fear if the crown passes to Vajiralongkorn while political divisions remain unresolved, opposing factions will intensify their struggle, with destabilizing consequences.  Strict lese majeste laws restrict discussion of the monarchy.” Tan adds: “It is not clear to me how this is going to pan out should the king pass on…”.

So its is the future of the monarchy and succession that worries many investors.

Reuters (2 April 2010) has a long story looking at several aspects and sectors of the economy. On tourism – recalling that the Federation of Thai Tourism Associations has become a pink shirt booster – Reuters notes that the  “Tourism Authority of Thailand expects 15.5 million tourist arrivals this year, up from 14.1 million last year. The red shirt protests could impact this, but those not part of the pink team say “business is doing just fine as big-spending visitors from other countries are shrugging off the problem. AllTheBestTravel says Japanese clients, who are usually sensitive to political developments, are still coming, viewing the protests as no problem unless they lead to the closure of airports.” Reuters observes that “Tourism … has proved fairly resilient to previous unrest.” It adds that, “Just a short ride from the protest site, Khao San Road, a a magnet for low-budget tourists, seems unaffected, with plenty of Westerners in the bars and Internet cafes.”

On investment, Reuters states: “portfolio investors are still putting money into Thailand, driving the stock market to a 22-month peak and the baht to 20-month highs. Foreigners have bought a net $1.6 billion of Thai shares since Feb. 22.” The baht is also rising. The real threat to long-term foreign direct investment is said to be “another coup.” It is added that the  “Board of Investment says investors have not relocate[d] but their investment pledges this year could fall 15 percent to 300 billion baht. Japanese firms, the country’s biggest investors, have expressed concern and might look elsewhere if the crisis continues.” More worrying for these investors however is Map Tha Phut.

Reuters considers that businesses in Bangkok “are largely operating as usual and many around the protest site are thriving, especially convenience stores, hotels, restaurants and stalls selling food and drink. CP All, Thailand’s largest convenience store operator, expects profit growth of 15-20 percent this year…. But some businesses around the site such as petrol stations, beauty salons and non-food shops are suffering, especially those that have opted to close their doors at the weekend.” While consumer confidence has dipped, Thai consumers “have not stopped spending. Domestic auto sales increased in February for the sixth straight month, up 57.7 percent from a year before.”

Official figures seem to confirm all of this: “On March 29 the Finance Ministry raised its economic growth forecast to 4.5 percent from 3.5 percent due to better exports and consumption.” At the same time “it warned the political turmoil could cut growth by as much as 1.8 points if it continued until the fourth quarter and led to a dissolution of parliament.” But that is essentially Minister Korn Chatikavanij’s view and he is unreservedly opposed to a dissolution. Meanwhile, the Bank of Thailand “forecasts economic growth of as much as 5.3 percent this year…”.

PPT doesn’t doubt that ongoing political turmoil could reduce economic growth rates. However, the loud bleating from yellow-cum-pink shirts seems somewhat histrionic.


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5 04 2010
Protests escalate, stock market up « Political Prisoners in Thailand

[…] earlier post on this topic may be of interest. Thai protesters ignored police demands to leave a central Bangkok […]

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Tourism and the economy « Political Prisoners in Thailand

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