Thailand’s economic planning agency on Monday pared its growth forecast for the year to between 4.2 and 4.7 per cent, as the country’s protracted political crisis exacted a heavier toll on investor and consumer confidence.
The National Economic and Social Development Board said Thailand’s economy grew a better-than-expected 4.9 per cent in the second quarter, compared with the second quarter of last year, propelled mainly by robust exports of goods and services.
But analysts predict second half growth will be well below the 5.5 per cent year-on-year growth achieved in the first half, as consumers increasingly refrain from purchases, and companies defer investment amid the murky political outlook.
Government spending on infrastructure, which was supposed to be a major driver of growth in the second half, is also being delayed since there has been no functioning parliament to approve the budget for the fiscal year that starts in October.
“We expect to see the second half growth rate at 3 per cent, mostly because of delays in government spending, and the risk of a slowdown in exports,” said Thanomsri Fongarunrung, an economist at Phatra Securities. “Exports are now growing 16 to 17 per cent. We expect it to slow to 10 per cent.”
Sriyan Pietersz, head of research at JPMorgan, said the domestic economy was being hit by, “a combination of higher interest rates, weak consumer confidence, and private investment being stalled due to lack of a clear outlook on government.”
With the October 15 elections now widely predicted to be postponed, the Thai finance ministry last week also forecast growth for next year of just 3.5-4.5 per cent, citing further delays in government spending.
Thailand has not had a parliament since February, when Thaksin Shinawatra, the prime minister, dissolved the body and called fresh elections. Mr Thaksin had hoped to defuse public protests against his family’s $1.9bn tax-free sale of their family telecommunications empire to Singapore’s Temasek Holdings.
But April 2 elections, boycotted by the opposition, were annulled after the country’s King Bhumibol Adulyadej called them undemocratic. Fresh elections have been called for October 15, but the Senate is still in the process of choosing new election commissioners to supervise the polls, which means they are likely to be delayed.
Mr Thaksin has said he will lead his Thai Rak Thai party in the election campaign, but has so far declined to specify whether he intends to seek the job of prime minister in the next government, or take a break from politics.
Tensions in the capital have intensified since August 24, when police arrested an army lieutenant for driving a car packed with explosives near Mr Thaksin’s house in what they describe as an assassination attempt. Other army officers were involved in a conspiracy to kill the premier, and police say they will issue arrest warrants soon.
The prolonged uncertainty, policy drift, and high tensions have begun to take their toll on the confidence of foreign investors, who initially took a sanguine view of Mr Thaksin’s dissolution of parliament and assumed Thailand would soon be back to business as usual.
“The sooner there is an election, and the whole issue is resolved, the better it is for Thailand,” said Greg Watkins, executive director of the British Chamber of Commerce. “Companies are certainly more nervous now than they were three months ago.”