Political chaos signals another rocky year for Thai economy

Political chaos signals another rocky year for Thai economy
Anti-government protesters gather at Ratchaprasong Junction during a mass rally at a major business district in Bangkok December 22, 2013

THAILAND - The economy will undoubtedly brace for another turbulent year in 2014, primarily because of the prolonged political conflicts.

The bigger picture looks discouraging. Public and private investment - a key economic driver - will remain subdued as the prospects for the two major government projects - believed to draw in more private investment - are opaque. Exports, despite improving from 1-per-cent growth this year, should not hit a double-digit gallop. Consumption would remain low without stimulus measures.

Most economists had expected improvement in economic indicators next year, following the sharp fall in exports, investment and consumption this year. Yet, while projecting 2014 growth rates at 3-5.2 per cent - which is above the 2.6-4-per-cent range of projections for 2013 - most economists have not yet factored in the impacts from the prolonged political unrest.

"Thailand's government has dissolved parliament, but the opposition has pledged to boycott the February election and it is difficult to foresee a lasting solution to the impasse," Glenn Levine, a Moody's Analytics economist, said in a note released last week.

Last month, the Bank of Thailand revised down its 2014 GDP growth forecast to 4 per cent from 4.8 per cent.

Gundy Cahyadi, an economist of DBS Group Research, noted earlier this month that by this move, the central bank suggests that growth momentum may even be worse than what many expect going forward.

"The ultra-dovish view might have been spurred by an assumption that further delays to the government's infrastructure projects could be on the cards. Remember that we had also warned of another sub-4-per-cent GDP growth in 2014 should there be further delays to the government's infrastructure projects," he said.

TMB Analytics recently slashed its growth projection for 2014 from 4.2 per cent to 3.3 per cent, against the 2.9 per cent forecast for 2013, due to lower-than-expected investment and limited growth in consumption. While tourism should post lower growth, exports would be the only engine to drive the 2014 economy.

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