How much has Thailand's political dysfunction hurt the economy? The country already seems likely to post the weakest growth rate in the region at below 3% this year, or barely changed from an already anaemic 2.9% growth recorded last year.
Condon: Politics has created uncertainty
"We estimate that the Thai economy at the end of the first quarter was smaller than it was at the end of last year," said Tim Condon, head of research and chief economist for Asia at ING Bank.
The National Economic and Social Development Board is scheduled to release official first-quarter gross domestic product (GDP) figures on May 19. Most expect the numbers to confirm what investors and consumers already know — conditions are bad and moving to worse, with exports, manufacturing and consumption indicators all showing declines in recent months.
The Bank of Thailand said the first quarter was all but certain to show a contraction as "households and firms remained cautious in spending given concerns on the prolonged political situation".
Mr Condon said Thailand bounced back relatively strongly from the 1997 Asian economic crisis, with growth averaging more than 5% from 2002 to the start of the global economic crisis in 2008. But from 2009 to the present, growth has fallen almost by half.
"After the global crisis, which had nothing to do with the domestic economy, we see growth well down. What can it be if not for politics?" he asked rhetorically. "And what can warrant optimism for 2014?"
ING projects Thai economic growth of 1% for the first quarter, with a full-year forecast of 2.4% and a rebound to 4.8% growth in 2015. In contrast, growth for Asia ex-Japan is projected at 6.5% in the first quarter and 6.4% for 2014.
"Thai politics has made things uncertain. Growth of 1% in the first quarter? It should be seven times that," Mr Condon said.
"Actually, it's hard to say that Thai growth is not in line with the trend because the trend may have shifted. World exports are at the same level today as they were in early 2011 and it’s the same for Thailand. Economic growth today has to come from domestic spending."
Mr Condon said that while the US and Japanese equity markets benefited from the US Federal Reserve's and the Bank of Japan’s monetary stimulus programmes, the rallies are over. The reality today is that both the regional and global economy are firmly locked in a low-growth, low-interest-rate environment.
"The developed world is still stuck with incipient deflation, while we see no inflation in the emerging markets," he said.
While China is unlikely to encounter a hard crash, given relatively low levels of public debt, the region's largest economy is also not immune to the slow-growth trend, with economic growth of 30% from the past decade to 7-8% now.
Mr Condon is bullish on bonds because central banks, including the Bank of Thailand, are expected to cut rates further to help prop up growth. But with policy interest rates already low, central bankers are increasingly reaching the limits of what monetary policy can do, he said. Fiscal stimulus is also unlikely to help revive growth.
"Public finances have deteriorated, and the impact has not been good [from past fiscal stimulus programmes]," Mr Condon said. "I think there is a great deal of frustration … I don't see fiscal policy coming to the rescue. With slow investment growth and low interest rates, credit will be a pretty good-performing asset this year."
ING projects 10-year bond yields falling to 3.4% by the end of the year from 3.7% now, with the Bank of Thailand likely to cut rates to 1.75% by year-end from 2% now. Inflation is projected to remain flat at 2% this year and in 2015.
Politics notwithstanding, Mr Condon said Thailand and other Southeast Asian economies is likely to get a boost in the years ahead as a result of the global crisis.
He said China's admission to the World Trade Organization in 2001 helped spark a massive boom in North Asia as companies flocked to establish manufacturing centres in the country and resulted in deindustrialisation in Thailand and other Southeast Asian economies.
"But now, with slower global growth, the next trend we will see is increased moves by North Asia to outsource production to Southeast Asia to help reduce costs and protect profit margins," Mr Condon said.
"Ultimately, I see Southeast Asia as a big winner from the global financial crisis."