Thailand Politics


Thailand: Thailand in political “limbo”, economy nears recession

May 14, 2014

The Thai Constitutional Court ordered the removal of Prime Minister Yingluck Shinawatra on 7 May. Yingluck was found guilty of abuse of power for having transferred a national security adviser to another post in 2011 shortly after she became PM. Along with Yingluck's removal, the court ruled that 9 of her 35 Cabinet members must also step down. In an extraordinary meeting, the remaining Cabinet members appointed Deputy Prime Minister Niwattumrong Boonsongpaisan to act as the new caretaker Prime Minister until elections are held.

Just a day after the Court forced her out of office, Thailand's National Anti-Corruption Commission (NACC) found enough evidence to indict Yingluck for negligence of duty in pursuing the controversial rice subsidy scheme. The decision was forwarded to the Senate to determine if she should be impeached. If found guilty Yingluck could be banned from politics for five years.

The governing Pheu Thai Party (PTP) is pushing for an election as early as July. However, the Elections Commission said that the polls may have to be postponed due to political turmoil and insufficient time to prepare for them. It is highly expected that the PTP would win that election. Anti-government protesters, led by Suthep Thaugsuban, have threatened to boycott the polls and to replace the current administration with an unelected “neutral people's council” in order to reform the political system and to put an end to the influence of Thaksin Shinawatra, Yingluck's brother and ex-PM. The “red shirt” supporters of Shinawatra, although angered by the Court's and the NACC's decisions, are not expected to escalate protests since the PTP is still in power. If the elections are disrupted, this could be an additional trigger for protests. The possibility that rival protests could take place in Bangkok's streets has raised fears of violence and a further escalation of the political crisis.

More turmoil has the potential to drag further on the Thai economy, which is on the verge of recession after nearly seven months of political crisis. Low consumer confidence, declining industrial production and subdued exports are adding to the already-weak growth outlook. If the elections don't take place in July, further delays in forming a government will affect the budget process for next year. FocusEconomics panelist Barnabas Gan, economist at OCBC Bank, comments on why OCBC downgraded its GDP forecast:

The downgrade is largely due to a downgrade of our government expenditure growth [...], amid similar downgrade in consumption and investment growth given the prolonged protests. On this, we recognize that Thailand's key three pillars: consumption, government expenditure and capital formation are likely to remain in contraction territories in 2Q14 given political uncertainties. On this, lower growth prospects will likely lead to lower industrial production and rising unemployment, given the observation that companies are already reducing workers.

FocusEconomics panelists reduced their growth projections for both this year and next. For 2014, the panel expects the economy to grow 2.5%, which is down 0.1 percentage points from last month's estimate. For next year, the panel projects that GDP will grow 4.3%.

Author:, Senior Economist

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