Post Election, Thai Economy Is Set To Slow

Thailand’s junta Prayuth Chan-o-cha has officially become the country’s prime minister after beating popular socialist contender Thanatorn Jurunrengkit in a parliamentary vote in June. But experts say Prayuth’s razor-thin majority coupled with a decline in exports and dismal GDP growth could spell trouble for Southeast Asia’s second-largest economy.

Prayuth’s election victory was no surprise to many. 250 senators participated in what was a contentious vote. The military-led government also makes it difficult for Prayuth’s opponents to campaign against him–it lifted the ban on all political activities just only three months prior to the March election.

New York University professor and former security advisor for the United Nations in Thailand Dr. Christopher Ankersen says the five-year period under Prayuth helped the military keep its overarching influence into the next era of Thai politics.

“The constitution and the voting formula that have been selected and essentially enforced have a very predictable outcome in that sense,” Ankersen says in an exclusive interview with Emerging Market Views. “The 20-year National Strategy, which has been baked in the constitution, has a clear agenda by which the status quo elites want things to look like.”

The 20-year blueprint vaguely focuses on three key areas–security, wealth, and sustainability. Drafted by the pro-military allies, it creates legal obligations for future governments including proper policy formulation and budget allocations. If future governments refuse to follow the laid-out strategy, their elected officials may face removal from office or jail term.

Dr. Ankersen cautions that “if things do not work in a way that Prayuth and his backers like, there will be some form of suspension, whether it’s through a judicial coup or an old-fashioned military coup.”

Prayuth’s slim majority of 254 seats in the 500-seat lower house mirrors the clear political polarization among Thais. The opposition is expected to fight over details on various issues such as military spending, stimulus packages, and the 2020 fiscal budget.

The possible complications over the 2020 fiscal budget approval, which has already been delayed from October 2019 to January 2020, may cause a slowdown in investment projects including Prayuth’s mega-infrastructure projects in eastern Thailand.

A Slowdown Awaits

Thailand’s GDP has dropped to 2.8% year-on-year, the lowest in quarterly growth in four years. The growth rate is down from 3.6 percent in the previous quarter. The country’s National Economic and Social Development Council cites the global economic slowdown and the ongoing trade war between the U.S. and China as the main causes.

Thailand’s central bank (BOT) released data showing exports shrank by 7.2 percent in May, after the 2.57 percent drop in April. The Bank also cut its 2019 export growth forecast to 0.3 percent.

Poon Panichpibool, a market strategist at Krung Thai Bank PCL, attributes the slow growth to a slump in tech and automotive exports to China. He also says that he did not expect the trade war to be this damaging.

“We tremendously revised the export number down from 3 percent from the beginning of this year,” Panichpibool told Emerging Market Views. But, he added, “with all things considered, Krung Thai Bank remains firm that exports will grow around 0.8 percent for 2019.”

Bleak exports have hit the country’s GDP growth forecast for this year, causing the BOT to drop the projected growth rate to 3.3 percent compared with its earlier prediction of 3.8 percent growth.

Other countries in the Southeast Asian region are also continuing to feel the heat from the China-US trade spat. Singapore exports fell for three consecutive months, posting a double-digit fall of 15.9% year-on-year in May, according to Enterprise Singapore