#Thailand: Prospects for Thai economic recovery downgraded as New Year looms

With Thailand gearing up to celebrate the start of a New Year, fresh doubt has been cast on the Thai junta’s ability to reverse the country’s economic decline, writes Martin Banks.

The Thai New Year, or the Songkran festival, is celebrated from 14-16 April but the festivities have been overshadowed by new data pointing to the country’s worsened financial fortunes and bleak prospects for the coming 12 months.

The dire economic outlook comes after the Thai military government recently repeated its aim to achieve an ambitious 3.5% gross domestic product growth target and stave off social instability.

The junta led by General Prayuth recently published a four-page advertising supplement in the Thai press outlining in flow chart fashion its 20-year vision for transforming Thailand into a “first- world nation”.

But reports show that the current reality is that Thailand is moving in the opposite direction, with official statistics showing the country is actually de-industrializing.

Total factory utilization fell below 63% in December, a recent nadir in a monthly contraction trend that began in 2014.

While Thailand is still attracting new FDI, a Japan International Cooperation Agency report recently rated Thailand among the bottom five countries in Asia where Japanese companies were likely to invest in new industrial production. Exports account for around 70 percent of Thailand’s GDP.

The Thai economy actually expanded 2.8% last year despite negative export growth.

Even so, the current drought, the worst the country has seen in decades, has hit nearly a third of Thailand's 76 provinces.

Some 2,000 Thai villages are surviving off water delivered by the government.

Shrimp and fish farms have been negatively impacted by drought conditions, with 200 closing down due to their seafood stock dying from heat.

Production of rice, sugar cane, shrimp and fish farms are all suffering from the drought that has seen water levels at dams drop to under 10%.

Sugar refining factories are currently operating 25% below full capacity.

With the production of sugar severely damaged, Thailand - the world’s second largest exporter of the product - will ship 20% less of the commodity this year compared to 2015.

According to a study from the University of the Chamber of Commerce, the drought could shave between 0.5-0.8% off Thailand's GDP growth, with its annual rice production predicted to drop almost 30% to 25 million tonnes.

Gen Prayuth’s military government, which grabbed power in a 2014 coup, has struggled to revive Thailand's flat economy, which is beset by falling exports, high household debt and low consumer confidence.

Deputy Prime Minister Somkid Jatusripitak, and six economic ministers were in South Korea last month in a bid to drum up business.

The deputy prime minister wants Thailand, which is in a dire need of restructuring its economy, to imitate South Korea through an unprecedented collaboration among the government, large firms and business start-ups to commercialise their ideas in a bid to create wealth and contribute as new drivers for the economy.

But Thaksin Shinawatra, the ex-premier, has consistently warned since the May 2014 coup that toppled his sister Yingluck Shinawatra’s administration, that economic mismanagement would be the junta’s ultimate undoing.

Many rice farmers support the family of Thaksin, ousted in a 2006 coup, who injected money into villages in the kingdom's long-neglected rural north and northeast.

Yingluck, who became prime minister in 2011, also poured subsidy into the rice sector, winning the devotion of the so-called grassroots 'Red Shirt' pro-democracy movement.

Support for the Shinawatra’s remains high in Thailand, a fact reinforced by the recent arrest of a Thai woman who faces jail on charges of sedition after she posted a photo of herself holding a red bowl that had a Thai New Year greeting from Thaksin and Yingluck Shinawatra.

The regime has seized more than 10,000 “seditious” bowls and threatened to send politicians to newly established “attitude adjustment” camps if they try to distribute such items ahead for the New Year holiday later this week.

Share this article: