Referendum failure ‘won’t hurt the economy much’

Economy August 05, 2016 01:00

By BUSINESS REPORTERS

THE

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RESPECTED business-sector and academic figures believe a positive vote in this Sunday’s charter referendum would have a limited impact on Thailand’s economy and investor sentiment.



Isara Vongkusolkit, chairman to the Board of Trade of Thailand, said he expected the vote would result in general acceptance that the country could follow the junta’s “road map to democracy” and hold a general election next year.

“Foreign countries are keeping a close eye on Thailand’s referendum,” he said. “If the voting resulted in the draft constitution’s acceptance, it would help guarantee that Thailand could follow our road map and have an election by next year. But if [it is not voted in], the plan to have an election could be delayed, and that could affect foreigners’ confidence.”

Vallop Vitanakorn, vice chairman of the Thai National Shippers’ Council, said the referendum’s outcome should not affect economic growth as he believed the government would ensure the election was held next year. He said if the draft constitution were not voted in, the draft could be amended quickly enough so the public and foreigners had confidence that Thailand would have an election as planned.

Charl Kengchon, managing director of Kasikorn Research Centre, said that if the charter were rejected it would affect investor sentiment and the financial market would be interested in how the charter writers handle that.

“We do not think the referendum will shake fund flows because their movement depends on the policy [interest] rates of the US Federal Reserve, the European Central Bank and the Bank of Japan,” he said.

He said foreign investors were engaged in Thailand for the long term and the scope of an investment was based on the return and the country’s fundamentals, which helped strengthen the competitiveness of their businesses.

Pruksa Real Estate chief executive officer Thongma Vijitpongpun said that if the charter were rejected, it would have a short-term effect for the economy because gross domestic product would still enjoy strong growth as a result of the government’s investment plan.

“It would also not have an impact on demand to buy residential [properties] as homebuyers still benefit from low interest rates,” he said.

But Paiboon Nalinthrangkurn, president of the Investment Analysts Association, said the SET Index could dip to 1,400 points next week if the draft were rejected.

He said the Stock Exchange of Thailand was going through a correction stage due to the price of crude oil dropping below US$40 per barrel, and a rejected charter would have an adverse impact on the sentiment of investors.

He said that to restore the confidence of investors, the government would need to reveal quickly the next step on its plan to restore democracy because the charter draft did not indicate what would happen if it were rejected.

However, the SET Index could stay around 1,500 points if the document were approved, and stocks in major sectors such as construction, tourism and banking were expected to achieve high trade volumes because they were related to public spending and private consumption.

Trinity Securities vice president Nuttachart Mekmasin said the referendum was expected to have a psychological impact on local investors but no significant effect on foreign capital movement.

Nuttachart said external factors that should be closely monitored included the Bank of England’s meeting yesterday, which decided on a 375-billion-pound (Bt17.5 trillion) quantitative-easing programme, US non-farm employment, the August 17 Federal Open Market Committee meeting and crude-oil price movements.

Kiatanantha Lounkaew, dean of the faculty of economics at Dhurakij Pundit University, also believes the result of the referendum will not have a significant effect on the economy and that effect would be short-lived.He said this was because the country’s economic momentum was mainly driven by the global economic environment as well as domestic economic factors. Even an overwhelming “yes” or “no” vote would not change that. But what ensued after the referendum may cause a stir in the financial market.

He said that as long as the government reacted appropriately to the outcome of the referendum, the stir would gradually fade away. What the government should do after the vote was tell the county what steps it would take. If the path were clear and reasonable, there would not be a political tsunami that would undermine the fragile economy.