February 04, 2014 00:00
By ERICH PARPART
A PROLONGED political conflict would dampen Thai economic growth, shaving up to Bt240 billion off gross domestic product (GDP) and causing the country to lag behind its neighbours, a private-sector group warned yesterday.
Meanwhile, other Southeast Asian countries such as Indonesia, Vietnam and Cambodia are expected to enjoy GDP growth of 5-6 per cent this year.
The Joint Standing Committee on Commerce, Industry and Banking said a political vacuum in the first half of this year due to the unresolved political conflict would have a profound impact on the growth of Thailand’s economy. This would be due to a lack of stimulation from the government, a slowdown of domestic investment and consumption, and decreased investor confidence due to higher risks, leading to missed opportunities for new investment.
The group, which includes members of the commerce, industry and banking sectors, convened its meeting yesterday.
Payungsak Chartsutipol, chairman of the Federation of Thai Industries, said the committee estimated that if the political conflict is prolonged, the Thai economic growth rate would be 1.5 to 2 percentage points lower than the previous forecast of 5 per cent. If it lasts for six months, the country’s GDP would lose Bt120 billion. If the conflict lasts for one year, GDP would be hit by Bt240 billion.
He added that the delay of government spending in 2012 created an impact on the economy in 2013, and a lack of a government in the first half of 2014 would definitely spell more trouble for budget spending in 2015.
The committee said the private sector would have to help itself through this tough time since there is a possibility of an absence of permanent government in the next six months due to the protracted election period.
“The most worrisome aspect of a prolonged absence of government is the lack of public spending to help stimulate the economy, and the impact on the investment environment and investors’ trust, which will have a negative effect on the economy in the long run,” he said.
Apart from a lack of public spending, another obvious problem is the lower number of private investment projects, since the Board of Investment does not have the authority to approve new projects without a permanent government.
“Foreign investment opportunities come and go all the time, but when they are gone, they are gone for a long time. Our neighbours are getting stronger and if the current situation is prolonged, investors will begin to look somewhere else in Asean for their ventures and it will lower the country’s competitiveness before the opening of the Asean Economic Community in 2015,” Payungsak said.
Payungsak said small and medium-sized enterprises (SMEs) are most affected by the current lack of a permanent government, suffering from liquidity problems brought on by lower sales numbers and the absence of stimulus from the government.
However, despite the lack of government support, the private sector is prepared to help itself and the SMEs that are affected by the current political turmoil, he said.