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July election will give a boost to economy: Economist

Hopes for a pick-up in the economy hinge on the proposed July election, said a DBS Research economist, following the political impasse that led to the disqualification of caretaker Prime Minister Yingluck Shinawatra today.

"Only a functioning government can provide the critical boost that the economy needs," said Gundy Cahyadi.

In a note, he said that the Constitutional Court’s decision could dampen the business sentiment, which has just covered from the end of street protests in February.

He also highlighted a doubt that a fresh election would take place on July 20.

His comment followed the Election Commission’s decision yesterday. Instead of submitting a draft on the Royal Decree for an election on July 20 to the caretaker Cabinet, the EC yesterday asked the government for a new round of meetings as there were some points of confusion in the draft.

"With or without PM Yingluck, the limelight has been and will be on the negotiation process between Pheu Thai and the Democrats," Cahyadi said.

At the end, he noted that markets should brace for another disappointment next week, when the first quarter GDP data is due. In this situation, he did not expect the Bank of Thailand to trim the policy rate further "given the effectiveness of any rate cut is seen to be diminishing".

At the April 23 meeting, the Monetary Policy Committee decided to leave the policy rate unchanged at 2.50 per cent. It will convene again on June 8.


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