As anti-government protests drag on, some top businesspeople are voicing concerns about the potential damage to regional competitiveness and the all-important tourism industry, but at least one rating agency says there is no reason to panic yet.
Kasikornbank chairman Banthoon Lamsam deplored the inability of the country's leaders to do anything but argue with one another, especially as the ASEAN Economic Community era nears.
He compared the endless political tension to burning the country down. While the short-term impact is the sell-off of stocks and bonds, in the long term the world may come to believe that the country has a management problem.
"The current political situation is a risk that the private sector is unable to hedge," he said.
He added that those with authority in both the government and the opposition should act on a rational basis and not demonstrate through rallies. Dissolving the House of Representatives or resignations will not solve this conflict, only acceptable rules that function in the real world.
Meanwhile, Thai Airways International says the rising political tension is a major risk to its final-quarter financial performance. Although there is no sign yet of cancelled incoming flight reservations, the national carrier will keep monitoring the situation, said Chokchai Panyayong, senior executive vice president for commercial operations.
Domestically, he said it was likely that the main impact would be postponed travel plans by government officials, who form a large market.
Chokchai said the first nine months of the year had been a hard time for all business sectors, including aviation, which has faced high competition, the global economic uncertainty, and a fluctuating foreign-exchange rate. Therefore it is essential for THAI to keep a close watch on these additional risks.
In the current quarter, THAI has kept on strengthening its internal operations via cost-saving programmes and also has a strategy to cope with the fast-changing business environment, he said.
"The big challenge for us in the final quarter is to reduce operational costs, along with boosting sales in every channel we can … We are putting a big effort into achieve such goals."
In the first nine months, THAI and its subsidiaries reported a net loss of Bt6.313 billion (S$246 million) against consolidated recorded profit of Bt5.629 billion year on year, putting a blame on appreciation of the baht. In the third quarter alone, its loss was about Bt6.35 billion.
Chokchai said THAI would face a drop in Chinese passengers by 30-40 per cent this quarter after Beijing cracked down on "zero-dollar |tours" in recent months.
According to Fitch Ratings, while Thailand's political instability has once again come into the limelight with the recent takeover of some ministerial offices by anti-government demonstrators, the widespread disturbances, especially in and around Bangkok, have become an ongoing feature of the political landscape since 2006 without gravely threatening underlying economic or financial stability.
A degree of political volatility is factored into the country's ratings. It would take a major impact on growth or investor confidence to trigger negative rating action - which Fitch does not expect to happen.
Growth fundamentals have withstood recurrent political and external shocks relatively well, it said, including the massive floods of late 2011. Annual growth in gross domestic product has averaged around 3 per cent since 2008, higher than the "BBB" peer average of 2.6 per cent. Moreover, the volatility of GDP activity over a longer time horizon is 3.2 percentage points, only 10 basis points higher than for Thailand's rated peers.
Financial fundamentals have also remained resilient. Previous episodes of political upheavals in recent years did not result in discernible outflows of domestic- or foreign-owned capital. Nor did they widen sovereign credit spreads to the extent of hurting government debt dynamics.
All of this does not imply that the credit profile is unassailable. Fitch believes political instability has retarded progress on infrastructure development - and thereby constrained Thailand's growth and inhibited convergence with its higher-income peers.
Moreover, political noise could increase investor skittishness as the US Federal Reserve's tapering of quantitative easing draws closer (even if the timing remains uncertain). Amid the recent emergence of a small current-account deficit, Thailand has a combination of above-trend (although slowing) activity, near-zero real interest rates and an anticipated rise in its budget deficit.
The combination of rising financing requirements amid an unsettled political environment and an onset of Fed tapering could thus place potentially greater strain on the sovereign's credit profile than currently anticipated. But the country's net external creditor position offers a significant buffer.
Fitch expects the recent political disturbances will dissipate in the run-up to His Majesty the King's birthday on December 5. However, the upshot is that the recurrence of periodic bouts of political instability pressures the sovereign credit profile to some degree, and constrains any prospect of uplift. But it remains difficult to conceive of an escalation in ongoing disturbances to a scale where they pose a clear and present danger to overall growth or financial stability.