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Thai economy suffers from political fallout

Updated On: Mar 28, 2006

It is for certain that the worsening political crisis is hurting Thailand’s economy.

Not only have the FTA talks with the US stalled, investors are also getting wary. The Asian Tribune reported the Thai Chamber of Commerce University's Centre for International Trade Studies as saying that growth for 2006 will be between 3.2 and 3.98 percent and that Thailand was losing competitiveness to other developing economies like Vietnam. It noted that the political crisis made it “difficult for Thaksin to push through any new reform or spending measures to trigger an investment recovery.” Business leaders nervous about the economic forecast have spoken out. Praphad Phodhivorakhun, chairman of the Federation of Thai Industries, stated, “We support calls for talks to bring back peace. The economy would be hard hit if the political tensions continue over the next two months.” Indeed, Temasek Holdings which bought over 49.6% of Shin Corp has lost a staggering S$1.39b with the recent plunge in the price of Shin shares. Temasek managing director S. Iswaran has said that it may sell off some Shin shares to keep Shin listed in Thailand. The highly-unpopular sell-off of Shin Corp to Temasek has even affected Malaysia-based Thai businessman Surin Upatkoon whom the Thai opposition calls a “Temasek stooge” after he became known as the majority shareholder of a private Thai-incorporated company that facilitated the Temasek-Shin Corp deal.

Tourist arrivals are also down. About 65,000 tourists from China and Singapore have cancelled trips to Thailand because of the political turmoil. This could adversely impact the Thai economy because of a decline in the services industry.

Thai share prices also closed 1.10 per cent lower on Wednesday, with foreign investors selling down banking and energy shares. “The ongoing political crisis is the main negative factor. Thai and foreign investors remained worried about political uncertainty,” said Wiriya Lappromrattana, a senior economist at Kiatnakin Securities quoted in The Nation.

Sources:

65,000 tourists scared off by political unrest (Straits Times, 22 March 2006)

Thai shares close 1.10 % lower because of political chaos (The Nation, 23 March 2006)

Free trade talks with Washington put on hold (Straits Times, 23 March 2006)

Businessman denies being Temasek stooge (Straits Times, 23 March 2006)