The protests currently rocking Thailand have reached the country’s financial markets. The tourism-dependent economy was already more severely affected than most by the pandemic, and there is little reason to be optimistic about a rapid improvement.
The MSCI Thailand index is down almost 30% in dollar terms in 2020, notably underperforming other markets in Southeast Asia. Much of that decline is recent: In June stocks were down just 10% year-to-date.
Some antigovernment protesters have focused on the wealth of King Maha Vajiralongkorn, which includes significant shares in large companies like Siam Cement Group and Siam Commercial Bank. The assets of the Crown Property Bureau were transferred to the personal ownership of the king in 2018 after a change in the law.
But the market impact of campaigns for disinvestment are likely to be overshadowed by the impact of decisions like the one taken last weekend to close transit networks as protesters attempted to gather. Repeated protests and responses by officials in Hong Kong last year sparked a sharp drop in economic activity.
Thailand’s growth, like other countries in the region, has been quietly rapid by international terms in recent decades. GDP per capita rose by 85% in the 10 years up to the end of 2019, and slightly over 500% in the last 30 years. Thai growth has overtaken that of other emerging economies like Mexico, Brazil and South Africa.
But that boom hides a distribution that is deeply skewed: Average real wage growth has slowed sharply, to below 2% for most of the last five years. And at 70% of GDP, the country’s household debt already is elevated for a nation at its current stage of development.
Without overinterpreting the underlying causes of political unrest, it’s reasonable to say as with most cases of widespread discord, that it doesn’t help when the fruits of growth are unevenly shared.
Even if all political tensions disappeared tomorrow, the pandemic is still the greatest shock the Thai economy has faced since the Asian financial crisis. The International Monetary Fund’s recent forecasts suggest the tourism-sensitive economy will still be 3% smaller than its end-2019 level at the end of 2021, by far the worst performance among its regional competitors.
Other notable parts of the economy are faring poorly too: Thailand is an automotive-parts hub, largely for the major Japanese auto makers, and the collapse of demand for new cars this year has hit the country’s manufacturing sector hard.
From a financial perspective, the protests will compound the existing challenges faced by Thai companies and the broader economy, adding a further layer of uncertainty for investors. With tourism likely to emerge from the global slump later than almost everything else, there is no light at the end of the tunnel for the Thai economy yet.
Write to Mike Bird at [email protected]
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