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Economy to stay hostage of divisive politics

Outcome of upcoming political turmoil should give an idea of how businesses will do this year

Thailand's economy and politics have become strange bedfellows. One wants to move away but the other does not want to let that happen. This year will see much more of the same. The economy will continue its struggle to break free, but will more likely be dragged down by a politics that will unleash one flashpoint after another.

Last year, the Thai economy relied on a few key factors that were anything but helpful. The world economy fluctuated between limited hope and much despair. Mixed signs from the United States regarding the future of QE (Quantitative Easing) monetary policy, Euro problems and not-so-impressive situations in China and Japan did not bode well for Thai exports. QE uncertainties also affected capital outflows and inflows here, making situations in the Thai markets all but natural.

Domestic demands were dictated by the "first-car" tax refund policy from 2012. That meant while car sales jumped as a result of the policy, other demands dropped due to increased burdens of car buyers. Government "stimulus" attempts ran into political stumbling blocks. The Bt350-billion flood management plan has been stalled. The Bt2 trillion borrowing scheme has been near the epicentre of the political crisis.

So, four major factors - the world's economy; domestic demands and spending power; export and government budget disbursement - were either unsatisfactory or outrageously bad. The local factors are unlikely to make a strong turnaround this year, with politics heading into the stormy unknown. Will exports be the saviour, as it is less tied with domestic complications? We can be hopeful, but not too much.

For years, the economy has struggled against politics. There were occasional signs that the prolonged political crisis has provided the economy with the "auto-pilot" flying capability. This year will give the auto-pilot theory an acid test. Tourism has not been affected, but in the near future who knows? The expected state spending on water management and Bt2-trillion infrastructure development have become too political to count on. The controversial rice-pledging scheme has compounded the government's fiscal status. Domestic demands have shown no signs of an immediate or drastic recovery.

The stock index showed it could dip below 1,300 points, and that was before the scheduled "Shutdown". If the February 2 election takes place, it would be doubtful if the poll could deliver a functional parliament. In other words, nobody can tell if the election will install a government that could work and implement and sustain a long-term economic policy.

Adding to that, the Asean Economic Community (AEC) is about to begin. With Vietnam more politically stable, Singapore and Malaysia boasting better infrastructural readi?ness and Myanmar getting more attractive than before, the Thai situation when the AEC is concerned becomes suddenly worrisome. Last year, the business sector held sway in spite of politics, but it was like an estranged couple trying to go through the nights.

So, what GDP growth should we expect? 4 per cent? Or lower? Last year it started with a projection of 5 per cent or higher, depending on which agency or institution you listened to. This year has begun with everyone holding his breath on politics, but as 2014 proceeds, the economy will most likely add to our worries. Will the strange bedfellows combine and unleash a big punch? We should find out quite soon.


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