BANGKOK - THAILAND'S economy has narrowly avoided a technical recession, edging back into positive territory with 0.9 per cent growth in the second quarter of this year.
In the first quarter, it shrank by a revised 1.9 per cent. Two quarters in a row of negative growth constitute a recession.
The figures, announced yesterday by the National Economic and Social Development Board, came as deflated consumer confidence edged up in the wake of the military's seizure of power in May, which enforced temporary calm after months of volatile street protests and government paralysis.
The junta has tried to reassure investors. After initially pausing all major infrastructure projects for review, it approved water management projects worth 800 million baht (S$31 million), and two new high-speed rail lines worth US$23 billion (S$29 billion).
The junta is also scrambling to clear a backlog of some US$22 billion worth of investment proposals.
Yet investors and analysts remain unimpressed and uncertain about the outlook. The board itself has trimmed its growth outlook for 2014, forecasting 1.5-2 per cent expansion, down from a previous estimate of 1.5-2.5 per cent.
One key indicator of the still sluggish economy is tourist arrivals, which last month clocked in at 1.91 million people - down 10.9 per cent from July 2013.
With martial law still in place, travel to Thailand will continue to be affected. The lucrative tourism sector accounts for around 10 per cent of the economy.
But deeper than that, there is worry that Thailand is losing competitiveness, and an unelected government backed by a military regime may not produce the reforms required to rejuvenate an economy whose growth now lags that of its neighbours.
"In the near-term, a lot of investors share a sense of relief, even euphoria, that there is a return to some sense of normalcy," said Singapore-based vice-president of research at Barclays Rahul Bajoria.
"But the big question is: Will Thailand stay competitive? Right now, it is pretty functional, but there has been little done to move it up," he said, citing continued reliance on relatively labour-intensive exports, a workforce with low English-speaking skills and poor investment in technological and scientific education.
In an interview with The Straits Times, Professor Pavida Pananond, a lecturer at Thammasat University, argued that Thailand needs not just physical, but also institutional infrastructure.
The structural reform needed requires a "more open and pluralistic debate with checks and balances", she said. "What Thailand needs now is analytical and critical thinking, and that is unlikely to happen under a dictatorial regime."
This article was first published on Aug 19, 2014.
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