It seems that the two-month long heated Thai-protests will cripple the country’s near term outlook. In any case, emerging markets like Thailand will likely remain out of favor in 2014 thanks to the possible end of the cheap dollar following the Fed’s QE Taper. Only a country with inherent strength can endure the broader emerging market volatility this year.
Though Thailand was relatively better placed in the emerging market pack mainly because of considerable infrastructure spending, mounting political tension makes the attainment of 3% economic growth this year uncertain.
Thailand’s Fiscal Policy Office (FPO) cut its GDP forecast twice in 2013 – once in November to 3.0% from 3.7% reflecting sagging exports and once before in July from 4.2% to 3.7%.
As per the University of Thai Chamber of Commerce, the current political uproar would cost Thailand “economic loss of approximately 20 billion Thai baht ($604.6 million)”. Given this loss, and the prospect for volatility ahead, many investors are turning bearish on Thailand lately.
What Happened in Thailand?
The protest is basically intended to expel Prime Minister Ms Yingluck Shinawatra’s administration – built on the political structure of former Prime Minister Thaksin Shinawatra. The rallies are in protest of an amnesty for transgressions dating back to the 2006 rebellion that expelled former premier, Thaksin Shinawatra, the brother of the current Prime Minister. The protest took the shape of a drive to end the sufferings under Thaksin Rule.
The protests were small at first mainly resorting to rallies, but quickly flared up. Sometimes protesters went on to seize sensitive areas like police headquarters and TV stations resulting in injuries and even death.
In December, Prime Minister Yingluck Shinawatra tried to cool off the agitation by dissolving the country’s parliament, and then calling for snap elections scheduled for February 2.
But the unrest intensified in January thanks to a futile attempt by the current government to pass a bill that would pardon several figures from the recent past including the former Prime Minister Thaksin Shinawatra so that he can return to the country from exile.
Thaksin – a controversial ruler of the country from 2001 until 2006, was overthrown by the military in a bloodless coup after being convicted as a corrupt politician.
If this was not enough, there are also reports that Thailand’s Democrat Party will boycott the upcoming elections in association with the protest which seeks an electoral reform, pouring cold water on Thailand’s plans for a resolution. Protesters now aim to ‘shut down’ the capital city, Bangkok, adding even more turbulence in the nation’s economic center.
To put an end to this revolt, some believe that Yingluck might go to the extent of declaring a state of emergency, hinting at little room for any compromise. This long-stretched protest is hurting government spending and the all-important Thai tourism industry (contributed 7% of the country’s GDP). In fact, twenty-three countries issued warnings against visiting Thailand amid the turmoil.