Economy in trouble 'for 2-3 years'

Economy May 15, 2014 00:00


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THE POLITICAL imbroglio will continue to drag the economy down for two or three more years, since there is no breakthrough in sight, Virabongsa Ramangkula, a former deputy prime minister, said yesterday.

“There is no sign that the current political situation will get any better. There is only a miracle left,” he said.
The political deadlock has clouded the economic future while the consumption slowdown has spelled disaster for small and medium-sized enterprises, he told the annual seminar of Prachachart Turakij newspaper.
Even though there is no prospect for a military coup and appointing a prime minister under Article 7 is impossible, holding the election in the near future will not solve the problem either, since there is sure to be an interruption from the opposition, which means that none of the proposed solutions is going to work, he said. 
The outlook for the economy is looking bleak, since there is no functioning government to stimulate the economy through mega-projects. 
The delay in drawing up the fiscal 2015 budget and the unclear goals of the government are also discouraging private investment.
The lack of investment in infrastructure is now a main concern because the country is at risk of being overtaken by its competitors, Virabongsa said. Thailand will not be able to benefit fully from the launching of the Asean Economic Community despite its geographical advantage.
The country has been in a savings mode for 17 years and that has caused a surplus in the current account, so it is now time to invest, he said. 
“To spend Bt2 trillion on infrastructure is not dangerous for the country’s financial position, but it will be dangerous for the country’s future if we do not invest in it. We are living in the age of globalisation, which means that standing still is equivalent to walking backwards,” he said. 
SMEs have taken the biggest blow, as the loss of consumer and investor confidence has dampened consumption and investment.
“SMEs and small manufacturers are having cash-flow problems because their mother companies have reduced their orders for products and parts, since sales of food, TVs, radios, motorbikes and basically almost anything consumable have gone down,” he said.
Anant Asavabhokhin, chairman of Land and Houses, said the current situation was similar to the economic crisis of 1997, since the turmoil started internally, but the effects are different.
“In 1997, the crisis destroyed businesses from top to bottom, which meant that big businesses started to feel the pinch first. But this time around the crisis has begun from the bottom up, which means full disaster for SMEs,” he said.
“Last time the financial crisis killed businesses via one bullet, but this time the political crisis is slowly killing businesses with a knife, which means that we will continue to bleed and bleed,” he said.
Boontuck Wangcharoen, president of TMB Bank, said the rise of non-performing loans among SMEs was worrisome and the next three months would be even worse, since the political situation would continue to erode consumer confidence.
“There is no cash-flow problem within the system, but there is a huge problem of liquidity among SMEs, as seen from the increase of NPLs from such operators. Fewer loans are being taken out by SMEs because they are unsure of the future because of the political uncertainty,” he said. 
Anant said that as SMEs fell to the wayside, big business was moving in, and SMEs in the future would be marginalised. Boontuck warned that SMEs employed 80 per cent of the workforce and if they began laying staff off, it would lead to a vicious cycle with no end in sight.
Separately, the Government Savings Bank will shift its lending target because of worries about the debt-servicing ability of the household sector.