Thailand's gross domestic product (GDP) is projected to rise by up to 5% next year provided the ongoing political conflict is not prolonged but could contract if the situation turns violent, warn economists.
A group of government officials stage a small protest near their office after work yesterday. Protests against the amnesty bill are growing, but analysts believe the economy will not suffer unless the political conflict becomes prolonged. PATTARAPONG CHATPATTARASILL
Former deputy prime minister and finance minister MR Pridiyathorn Devakula yesterday said if the state continues to push forward the blanket amnesty bill, it will only fuel anti-government sentiment.
"Whether GDP reaches 4% next year depends on the stability of the situation. Withstanding conflict means the economy could grow by 4%," he told a seminar on the economic outlook hosted by the Federation of Thai Industries (FTI).
MR Pridiyathorn said Thailand is in the best position to take advantage of the Asean Economic Community, as the country has the best production base in the region and Thai products are highly regarded throughout Southeast Asia.
Kobsak Pootrakool, an executive vice-president of Bangkok Bank, said the economy will likely contract by 1% to 1.5% next year if the situation turns bad and negatively affects domestic consumption and investment.
"But it could grow as much as 5% if things remain calm," he said.
Mr Kobsak said prolonged political instability would distract the government from realising its planned 2-trillion-baht infrastructure projects to the fullest.
However, it is unlikely to affect the economy in the long run, as most Thai production occurs outside Bangkok.
FTI chairman Payungsak Chartsutthipol said his agency will convene a special meeting of its board on Friday to discuss the situation and a potential response.
But so far, the situation has raised only minor concerns among the members, he said.
The stock market is a better reflection of the political situation than is investment, as the latter takes longer to show any effect, said Mr Payungsak.
He said exports will play a big part in Thailand's economic recovery, given that the US, Japan and Europe are recovering.
However, Paul Gambles, the managing partner of MBMG Group, told the forum that domestic political developments are not likely to result in an economic contraction.
He pointed to Thailand's economic performance being on a par with that of neighbouring countries despite the bloodshed centred on the Ratchaprasong intersection in 2010.
"Business carried on, and politics remained separate," he said, citing Mark Mobius, the renowned emerging markets fund manager.
No political crisis has derailed the economy to date, said Mr Gambles, adding that something radically different would have to occur in order to sink the economy.
Prof Steve Keen, a lecturer in economics and finance at Australia's University of Western Sydney, said Thailand is the Italy of Southeast Asia in the sense that the economy continues on track despite all the political bickering.
The role of Thai politics is perhaps more symbolic than deterministic since the country has learned to cope with political upheavals, while the economy and society still function very well, he said.
The US political paralysis will likely affect consumer and investor confidence much more than political developments in Thailand, said Prof Keen.
Michael Hershman, a co-founder of the Berlin-based Transparency International, expressed disappointment that the blanket amnesty bill is moving forward, saying it makes Thailand's investment climate highly risky.
The bill, which would pardon everyone involved in political and corruption offences over the past nine years, sends a message to potential investors that the country is unlikely to pursue a course of integrity.
"In pushing this bill, parliament and the government is demonstrating that the concept of impunity is alive and well in Thailand," said Mr Hershman.
He said the international community is closely following developments in Thailand.
The German-Thai Chamber of Commerce said the political situation here is normal for a democratic system.
"I think it's good, and Thailand can be proud of its democracy, that you can go and demonstrate even in front of parliament," said president Karl-Heinz Heckhausen.
"But corruption is unacceptable. Large German companies are very strict about corporate-compliance regulations. There is not the slightest compromise."
Marc Saxer, resident director of the Friedrich Ebert Foundation Thailand, said the political situation here is a concern but a bit overstated.
"How many times have we seen this already? It's expected, but there is a belief the major power centres of Thai society have found some arrangement that will help resolve the situation," he said.
Meanwhile, Transport Minister Chadchart Sittipunt told a meeting at the German ambassador's residence late on Monday that the public is welcome to observe the bidding process for the government's 2-trillion-baht infrastructure projects to ensure transparency.