Political risk weighs on economy
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Political risk weighs on economy

Businesses and foreign investors wait on court rulings to make strategic plans

Mr Srettha outlined a budget bill tallying 3.75 trillion baht for fiscal 2025, meant to jump-start Thailand's sluggish economy as the House of Representatives began a three-day debate last week. The budget aims to help the economy grow to its full potential, said Mr Srettha. Chanat Katanyu
Mr Srettha outlined a budget bill tallying 3.75 trillion baht for fiscal 2025, meant to jump-start Thailand's sluggish economy as the House of Representatives began a three-day debate last week. The budget aims to help the economy grow to its full potential, said Mr Srettha. Chanat Katanyu

Thai politics is nearing a turning point, as next month the political fate of Prime Minister Srettha Thavisin and the leader of the opposition Move Forward Party (MFP) are scheduled to have their cases decided by the Constitutional Court.

There is uncertainty about the rulings, slated for July 3 for the dissolution case against the MFP and July 10 for Mr Srettha's case, with the business sector concerned about the effect on the Thai economy if the current administration is disrupted.

Mr Srettha is struggling to defend himself in an ethics probe brought against him in the Constitutional Court, following his controversial appointment of Pichit Chuenban as PM's Office Minister in the last cabinet reshuffle.

Pichit, who was sentenced to six months in prison in 2008 along with two colleagues after they tried to bribe Supreme Court officials by handing them a paper bag containing 2 million baht, resigned shortly before the Constitutional Court agreed to proceed with the petition for the probe.


Aat Pisanwanich, an independent analyst on international economics, said the political situation in Thailand is highly uncertain.

He said if there is a political change, any new coalition government will likely not include the Pheu Thai Party, which currently holds the most seats in parliament.

If Mr Srettha is determined to have violated ethics regulations by appointing Pichit, which would pile pressure on him to step down, Mr Aat sees three potential candidates for the next premier.

These candidates comprise Paetongtarn Shinawatra, the leader of the Pheu Thai Party and daughter of former premier Thaksin Shinawatra; Chaikasem Nitisiri, a key Pheu Thai Party figure; and Bhumjaithai Party leader and Deputy Prime Minister Anutin Charnvirakul.

If Ms Paetongtarn is chosen, there may be questions about her knowledge and capabilities, affecting already weak confidence in the government, said Mr Aat.

The House of Representatives held a three-day debate last week on the budget proposal. Mr Aat says the public has diminishing confidence in the current administration. Chanat Katanyu


He said the diminishing confidence in the government stems from the public's reduced faith after the Pheu Thai Party allied with the previous coalition government, sidelining the MFP in forming a government, though the MFP won the most votes in the election.

Another factor affecting confidence is the lack of clear results from the government's 10-month tenure. Many projects, such as the Land Bridge, soft power initiatives and the digital wallet handout, have yet to yield tangible outcomes.

Meanwhile, rising production costs have increased the cost of living, making Thailand one of the most expensive countries in Southeast Asia, surpassing Vietnam, Indonesia and Malaysia, said Mr Aat.

He said a reduction of the policy interest rate, long supported by Mr Srettha's government, is worth pursuing as it would ease the burden on debtors and stimulate domestic investment.

The Bank of Thailand is reluctant to cut the rate because domestic consumption is still growing, said Mr Aat.

However, the general sentiment of the public and market vendors is spending is not as fluid as in the past, he said.

In addition, the rise in consumption is from a low base during the pandemic, making this growth appear illusory, said Mr Aat.

"Thai inflation rates are relatively low, which do not align with rising oil prices. Oil prices are a crucial production cost, causing overall production costs to rise, even though inflation does not correspondingly increase," he said.

Visit Limlurcha, vice-chairman of the Thai Chamber of Commerce, said the private sector would like more stability from government.

Mr Srettha and Ms Paetongtarn, middle, pose with young party members after the '10 Months Without Waiting, Moving Forward to Achieve 10 out of 10' event at party headquarters in Bangkok's Huai Khwang district last month.  Pattarapong Chatpattarasill

Having a stable government is crucial for maintaining investor confidence as Thailand vies for foreign direct investment, he said.

Thailand must adjust its production structure, improve competitiveness and drive economic growth, which is still recovering amid the global economic downturn, said Mr Visit.

As a result, the private sector and government need to collaborate to foster an economic recovery. In the short term, he said companies want state budget disbursement to be accelerated.

Chaichan Chareonsuk, chairman of the Thai National Shippers' Council, echoed calls for government stability as exporters are buffeted by global uncertainties such as ongoing geopolitical tensions in the Middle East, which increase freight costs and could escalate to become a trade war in the second half of the year.

Mr Chaichan said if Thailand's political situation is stable, it will expedite strategic and budget planning for 2025.


The uncertain future of Mr Srettha, often dubbed a salesman tasked with attracting foreign investors to Thailand, has manufacturing operators concerned, fearing an impact to investment prospects and the government's flagship economic policies.

The prime minister, who insisted on playing the role of a salesman to increase foreign investment, has talked to several companies about expansion into Thailand, especially during his overseas trips.

"A change to his premiership will worry foreign investors, resulting in halts or delays to their decisions to invest in Thailand," said Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI).

If the court's hearing leads to the dismissal of Mr Srettha from the post, political insecurity will erupt, causing investors to wait for clarity on the new premier and whether the same policies will be continued, said Mr Kriengkrai.

Tourists take photos with Wat Arun as a backdrop. Mr Sisdivachr says the tourism sector could be affected by unstable politics following the two Constitutional Court rulings. Apichart Jinakul

Policies such as the 10,000-baht digital money handout, the main campaign pledge by Pheu Thai Party before the 2023 election, are at risk if political turbulence emerges, he said.

Similar political uncertainty erupted last year when Pita Limjaroenrat, former leader of the MFP, failed to secure sufficient support in parliament on July 13 to become the country's prime minister, even though the party won the most votes in the May 14 general election.

The unclear timeline for a new government dented business confidence at that time, said Mr Kriengkrai.


Politics was among the factors causing the Thai Industries Sentiment Index (TISI) to decrease to 92.3 points in July last year, down from 94.1 points in June, reaching the lowest level in 10 months.

Domestic politics was among the growing concerns of 1,329 entrepreneurs across 46 industries under the FTI surveyed for the TISI in May this year.

The index continued to fall this month to 88.5 from 90.3 points, with 15,000 workers losing their jobs this year.

He said political troubles are expected to worsen the Thai economy, which is already plagued by weak consumer spending amid high levels of household debt, which is causing banks to tighten their lending criteria, affecting many businesses such as car manufacturing.

Narongsak Jivakanun, chief executive of PTT Global Chemical, said he believes the government will not allow the manufacturing sector to stumble from problems caused by politics.

Thailand is a hub of internal combustion engine cars and some electronic products, he said.

"We believe the government will manage to keep this status regardless of political problems," said Mr Narongsak.


Sisdivachr Cheewarattanaporn, president of the Association of Thai Travel Agents, said unstable politics related to the two court cases would undeniably affect the economy, and the tourism sector in particular.

Mr Sisdivachr said partner operators overseas, such as from China, already voiced concerns over the situation.

As the tourism sector is quite sensitive to external factors, he said political uncertainties would disrupt the sentiment of inbound tourists who might be worried about unpredictable situations.

"It is necessary to prioritise economic and tourism confidence," said Mr Sisdivachr.

Containers for export are sorted at Klong Toey port in Bangkok. Mr Chaichan says Thai shippers want more government stability as exporters deal with geopolitical tension in the Middle East. Varuth Hirunyatheb

He said the government should be proactive in its communication, promoting safe tourism as well as potential destinations in Thailand.

"If political tension escalates, it is the duty of all sectors to save the tourism industry by ensuring tourists the industry will remain intact," said Mr Sisdivachr.

If there are no changes at the administrative levels, the government should use this opportunity to accelerate the market, he said.

The visa-free programmes, airport development and promotion of second-tier cities are good initiatives, but there are more things the authorities should do, said Mr Sisdivachr. For instance, nominating five or 10 second-tier cities as pilot cities to develop into major tourism cities, and equipping them with sufficient infrastructure, not only marketing promotions, he said.

The government should also listen more to the private sector because companies can supply it with information for effective policy planning, said Mr Sisdivachr.

Phusadee Arunmas and Molpasorn Shoowong

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