Thai political crisis may curb growth if infrastructure projects delayed

Thai political crisis may curb growth if infrastructure projects delayed

BANGKOK - Political unrest in Thailand that has forced the prime minister to call an early election could further delay infrastructure projects expected to support the economy in 2014 and hit tourism, possibly sending the current account into deficit.

The government has plans to spend 2 trillion baht (S$78.1 billion) on infrastructure projects between this year and 2020, which would boost growth and investment at a time of tepid global demand.

Even before the latest political unrest, the projects - intended to lift GDP by at least one percentage point per year - have been delayed by legal hurdles.

The opposition has asked Thailand's constitutional court to decide if it was legal for such huge projects to be funded off-budget, and the court on Wednesday agreed to hear the case.

Even if the court decides quickly, which is unlikely, there will be further delay because embattled Prime Minister Yingluck Shinawatra has called a snap election for Feb. 2, so the plans have to be put on hold until a new government is formed. Meantime, the political crisis continues.

"We are currently pencilling in GDP growth at 4.5 per cent in 2014, but this is dependent on the government's ability to execute the infrastructure projects," said economist Gundy Cahyadi with DBS Bank in Singapore.

"The negative feedback loop from failure to once again deliver these projects will be significant," he said, adding that without the boost from public works, growth could again be below 4 per cent next year.

Economist Nuchjarin Panarode with Capital Nomura Securities said she had expected little support from the projects next year after earlier delays, and she predicted growth of 3.8 per cent for 2014 after 3.1 per cent for this year.

The infrastructure projects include high-speed railways, highways and mass-transit networks in Bangkok.

A separate 350 billion baht flood management programme has gone nowhere since being halted by a court in June pending environmental impact assessments. The programme is meant to prevent a repeat of 2011's severe floods, which slashed GDP growth that year to 0.1 per cent.

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