Political turmoil threatens prospects of Thailand's floundering economy

The political turmoil unleashed by the dismissal of Thai Prime Minister Srettha Thavisin is likely to deal another blow to the already struggling economy, where millions of people drowning in debt have been waiting for long-delayed cash handouts, News.az reports citing Reuters .

Southeast Asia's second largest economy grew 1.5% in the first quarter of 2024 compared to a year earlier, slowing from the prior quarter's 1.7% expansion and lagging regional peers.

The tourism-dependent country of 66 million people has struggled to recover from the COVID-19 pandemic, and major growth engines, including an automobiles sector that is the largest in the region, are still spluttering.

Tim Leelahaphan, senior economist at Standard Chartered Bank, said the political upheaval had cast doubts about the passage of the 3.75 trillion baht ($107 billion) national budget for fiscal 2025, as well as the 500 billion baht nationwide cash handout that was a flagship Srettha policy.

"Political uncertainty and an unclear political outlook could have adverse implications for fiscal policy," he said. The caretaker deputy finance minister said on Thursday the budget would not be delayed.

Srettha's ouster by the constitutional court on Wednesday came a fortnight after his government opened registrations for a scheme to give away 10,000 baht to 50 millions Thais, a key election promise of his Pheu Thai party.

Over 16 million people had applied to receive the "digital wallet" handout on the day registrations opened, crashing the system but signalling huge demand for the controversial scheme among ordinary Thais hurting from the slowing economy and high levels of personal debt.

Household debt stood at 16.4 trillion baht, or 90.8% of GDP, at the end of March, among the highest in Asia.

The central bank, which had bickered with Srettha's administration over the scale of the handout, left its key interest rate (THCBIR=ECI), opens new tab unchanged at a more than decade-high of 2.50% for a fourth straight meeting in June.
It is expected to hold the rate again when it meets on Aug. 21.

Ballooning household debt has also hit the car industry. Thailand is home to the factories of Toyota Motor (7203.T), opens new tab and Honda Motor (7267.T), opens new tab, and overall production in the sector has dropped for 11 straight months into June as local sales slumped.
Exports of car and car parts also dropped 0.4% in the first half of 2024 from a year earlier, with main markets Malaysia and Vietnam down nearly 30% on the year, commerce ministry data showed.

News.Az