Economic loss 'less than from floods'

Economic loss 'less than from floods'

Protest set to hit GDP, foreign investment

Even though the potential impact on the economy from the planned Bangkok shutdown remains uncertain, the scale of the loss is expected to be less than that from the 2011 floods, economists say.

It is difficult to clearly estimate the impact of the protest planned by the People's Democratic Reform Committee (PDRC) as it largely depends on its length and incidents during the shutdown, said Charl Kengchon, managing director of Kasikorn Research Center (K-Research).

PDRC leader Suthep Thaugsuban has called mass rallies to occupy seven important intersections including Ratchaprasong, Asok and Victory Monument starting from Monday to put greater pressure on caretaker Prime Minister Yingluck Shinawatra to step down, raising concerns that violence could be ignited.

Bangkok, which has daily economic activities worth about 10 billion baht, is estimated to contribute about 30% of Thailand's gross domestic product (GDP), Mr Charl said.

However, the planned siege is not expected to cause severe economic damage compared with the 2011 flood because manufacturing facilities will still be able to operate normally.

The World Bank estimated that the devastating floods caused damage costing 1.4 trillion baht.

K-Research forecasts GDP growth this year of 3.7% if a new government is set up before the end of the second quarter and economic stimulus measures are in place.

But growth could be only 2.5% if there is no government or an interim government, said Mr Charl.

Domestic consumption is not expected to regain momentum as swelling household debt and negative spending sentiment prompted by the political situation dent demand.

Exports, meanwhile, are seen as the most reliable factor for growth this year on the back of economic recovery in Europe and the US.

Kampon Adireksombat, head of Tisco Securities' economic strategy unit, said the impact of the anti-government protesters' plan to paralyse the capital depends on blocked areas and safety concerns.

Besides upsetting tourism, safety concerns will have an adverse effect on domestic consumption and foreign direct investment (FDI).

Tisco estimates GDP growth this year will be 3.7%, down from an earlier forecast of 4.5%, due to domestic political uncertainties and the absence of public investment projects, Mr Kampon said.

Even if the Feb 2 election is held and a new government is formed, the new government may not have the capacity to implement economic stimulus measures as it will mainly focus on political reforms.

If the election is deferred without good reason, this will worsen the situation and heighten political uncertainties, causing FDI to decelerate, said Mr Kampon.

The possibility of an emergency decree is another risk to foreign investments and tourism.

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