Risk of double-blow raised

Thailand should brace for political conflicts at home and overseas, which could deal a double shock to the Kingdom's politics and economy, according to Standard Chartered Bank economists.

Speaking at the bank's Global Research Briefing 2013 for corporate customers yesterday, they said political conflicts, chiefly in the United States and Europe, could rock global economic stability this year. Meanwhile, Thailand could also be haunted by rows over Preah Vihear and the Pheu Thai Party's push for constitutional amendments.

David Mann, Standard Chartered's head of regional research, Asia, said that these days, politics seemed to play a bigger role in dictating economic direction than economic issues themselves.

The narrowly averted "fiscal cliff" in the US and the lack of clear solutions to the European debt crisis are examples of the risks we now face, he said. Another cliff is waiting as US and European politicians negotiate spending cuts. The situation in Europe deserves great attention, as any political change may put pressure on the process to end the crisis, he noted.

Mann added that under the deal reached early this month, the US economy should expand 2.3 per cent this year and 3 per cent next year. Risks persist, as more talks to avoid the fiscal cliff once and for all are ongoing.

The world will be closely watching general elections in Germany and Italy this year, to see if Europe's attempts to handle the public debt crisis will be derailed.

Callum Henderson, global head of FX Research, also expressed concern about the increasing influence of politics on economic direction, as seen through Japan's attempts to introduce more populist policies.

Being a small country, Thailand will inevitably be affected by these global events. Domestically, political tensions could also rise, which could affect the economy as a whole, said Usara Wilaipich, Standard Chartered Bank (Thai) (SCBT) senior economist. Aside from the Thai-Cambodian row on the land around Preah Vihear Temple and charter amendment, she highlighted looming verdicts in several politicians' court cases as possible reasons for heightened tension.

"We have given more weight to the political situation as a crucial risk factor, because if the government's stability is shaken, public investment - especially the water-management and infrastructure projects - might not happen," she said.

Conflicts could derail investment, chiefly the government's Bt350-billion water-management plan, which is expected to spark huge private investment.

SCBT forecasts Thailand's 2013 economic growth rate at only 4 per cent, against the consensus of 5-5.5 per cent. Domestic risks aside, Thailand's export should expand only 5-8 per cent this year.