Thailand: Pheu Thai party wins elections with overwhelming majority
July 3, 2011
On 3 July, left-wing Pheu Thai party led by Yingluck Shinawatra won Thailand's general elections. According to the Thai Electoral Commission, the Pheu Thai party garnered 265 seats in the 500-seat parliament and agreed to form a four-party coalition. The new coalition controls 299 seats, providing Yingluck Shinawatra with a stable platform to implement her policy agenda. The ruling Democrat party will return to the opposition benches after obtaining 159 seats in the House of Representatives, prompting incumbent Prime Minister Abhisit Vejjajiva to concede defeat and announce his resignation as the party's leader. The military, which had expressed its opposition to the Pheu Thai party and had ousted former prime minster Thaksin Shinawatra (the brother of Yingluck Shinawatra) in 2006, has not intervened in the democratic process, paving the way for a smooth transfer of power between the two major political blocks. International observers and local analysts classified the entire election process as surprisingly peaceful. The election result was welcomed by the markets as it is likely to provide the country with a relatively stable political landscape, following on six years of political and social unrest in the wake of the 2006 coup. For the time being, Yingluck Shinawatra allayed concerns following allegations made by her adversaries that she would try to bring back her brother from exile, arguing that she will focus on her party's economic program and the country's reconciliation. During her campaign, Yingluck had proposed to lift rice prices, thereby boosting farmers' income, to increase the minimum wage from the current THB 159-221 range per day to THB 300 per day (USD 9.85), and to raise spending on several infrastructure projects. While these policies are likely to spur consumption and investment, market analysts fear they could lead to fiscal indiscipline, distort the market and add further inflationary pressure going forward.
Author: Ricardo Aceves, Senior Economist