Special Report: Prolonged protests set to damage already fragile Thai economy


The People’s Democratic Reform Committee (PDRC)’s latest announcement of more protests in January has raised concerns that the prolonged protests will further hurt the country’s economy and hamper growth.

The Pheu Thai Party claimed that the anti-government rallies have so far caused more than 70 billion baht in economic damage to the country. The party warned that if the protests were prolonged, the country’s economy, particularly the tourism sector, would be severely affected and economic growth curtailed. International confidence in Thailand would also be extensively eroded if the general election failed to take place on February 2 as scheduled.

Foreign investors in the Thai stock market have reportedly sold off more than 200 billion baht worth of shares since the protests began.

Political protests were already having an impact on Thailand’s tourism industry, which accounts for around 7 percent of the gross domestic product. Meanwhile, a number of nations have issued travel advisories warning to their citizens against traveling to Bangkok, a key hub for the tourism industry. The tourism sector, which grew strongly in 2012 and 2013, will likely face a serious setback if the political violence is protracted.

Many international analysts have noted that recent negative investor sentiment towards Thailand cannot be fully blamed on the political tensions. Thailand suffered sharp capital outflows amid the tapering panic earlier this year, prompting investors to sell off around 28 percent of their holdings from late May to late August, while deteriorating economic fundamentals have also put investors off. To make the matter worse, the Thai economy unexpectedly slipped into recession in the second quarter, contracting 0.3 percent on the previous quarter, as exports and domestic demand faltered. The country is also running a current account deficit, leaving it exposed to the long-awaited tapering of the Federal Reserve’s stimulus program.

The current turmoil also coincides with the rise of neighbouring Myanmar and the Philippines, both of which are enjoying a period of political stability and quickening growth.

Moody’s Investors Service previously commented on the situation, saying that the protests will likely further undermine investor confidence. Prolonged or escalating protests will adversely affect foreign investment and tourism, and exacerbate delayed public infrastructure investment, which will weigh on Thailand’s future growth in 2014 and beyond.

With the country facing political deadlock, rebuilding foreign investors’ confidence will be one of the top priorities for the Board of Investment in its action plan next year. The Industrial Promotion Department has downplayed concerns about unrest, saying businesses have survived many crises in the past.

Despite previous reports indicating ongoing protests hampered business sentiment and damaged the country’s tourism, mall operators in Bangkok reported a rise in profit as demonstrators flocked to stores near rally sites. Central World, Paragon shopping complex as well as Terminal 21 have reaped benefits from the recent gathering of anti-government protesters given that rally sites are often situated near malls and department stores along Sukhumvit road.

On December 22, a number of stages were set up across Bangkok in a bid to further pressure the current administration to resign. Skytrain operator Bangkok Metro Public Company Limited (BMCL) reported a massive rise in passenger number during rallies as members of the public opted to use public transport to avoid traffic congestion caused by protests. During the weekends, BMCL said the figure was close to 220,000 per day, also buoyed by year-end shopping sprees.

The MRT subway operator also reported a 60% rise in the number of commuters on December 22, recording over 300,000 trips on the day; 60% higher than the average 170,000 trips on weekends over the first 10 months of 2013.