Previous Quarterly Editions
Expropriation Risk: 46 46 46 46 Political Violence Risk: 58 58 58 59 Terrorism Risk: 58 58 55 55 Exchange Transfer and Trade Sanction Risk: 54 73 73 55 Sovereign Default Risk: 27 27 27 37
TREND ▼
Although Thailand was lauded for its COVID-19 management, a second surge of the virus has brought total cases to nearly 80,000 and deaths to nearly 400. Although this is still modest compared to some other countries, it postpones Thailand’s economic recovery. The country’s dependence on exports and tourism have caused it to suffer more economic damage from COVID-19 than any other South-east Asian country. In 2020, Thailand’s economy shrank by 6.1%, its worst drop since the 1997 Asian financial crisis. A second COVID-19 surge in late December 2020 caused the National Economic and So-cial Development Council to revise its economic growth projection for 2021 down a point; it is now set at 2.5-3.5%. For the most part, Thailand has been closed to foreign tourists for the first quarter of 2021.
But COVID-19’s greater cost has been the expansion and solidification of a protest movement. Although the demonstrations were originally sparked by the dissolution of the Future Forward Party in February 2020, the movement shifted from defence of the political opposition to criticism of the government for its handling of the economy as the economic crisis underscored continued social and economic inequities. Over the past year, the movement’s menu of demands has broadened to include the resignation of Prime Minister Prayut Chan-o-cha, a new constitution that reduces the political role of the military, and reform of the monarchy. Episodic lockdowns during the pandemic suppress the protests, only for them to resurge at greater strength with reopening.
Prayut’s government initially attempted to control the movement by arresting its leaders, but by mid-year the growing demonstrations were met with forcible crackdowns. In December 2020, the US Sen-ate passed a resolution supporting the Thai protestors. Since February 2021, the movement has been further energised by the military takeover in Myanmar and the civil disobedience movement there. In parliament, the opposition has taken advantage of this momentum to mount a no-confidence vote in February 2021, which failed but nevertheless provided four days of public debate on Prayut’s administration and attempts to pass legislation that would begin the process of amending the constitution. These too have failed so far, but the pressure on Prayut in parliament and on the streets is growing.
TREND ►
Assuming the COVID-19 threat wanes, fewer lockdowns and other emergency provisions will ease the possibility of government closures of businesses. However, the Prayut administration will look to infrastructure development for economic recovery over the long term.
In the mid-term, expropriation of land will likely rise for several projects. In early 2020, the government announced it would expropriate nearly 20,000 acres, mostly farmland, for infrastructure related to the Eastern Economic Corridor.
Foreign investors in the special economic zone will be given some exemptions from restrictions on foreign ownership, but likely face some local opposition. Also on the table is the construction of a sixth Thai-Lao bridge across the Mekong by 2025, announced by the government last October (2020), and the continual possibility of a joint venture with China for a rail link from the Thai-Lao border to Bangkok.
Barring more serious surges of COVID-19, and with the vaccination programme gearing up, Thailand will gradually reopen in 2021 and Prayut will be forced to lift emergency powers he claimed in 2020 be-cause of the pandemic. He will be able to claim some success in taming the pandemic with the reopening, but it will also be more difficult to quell the protests, which will expand exponentially.
If Prayut cannot contain the demonstrations, he faces continued no-confidence motions in parliament, but more seriously the threat of being deposed by military coup. He cannot assume that King Maha Vajiralongkorn would veto his overthrow: in the annual military reshuffle last October (2020), the king refused to accept Prayut’s recommendation for top promotions. This is a worrisome sign for the prime minister that he may be losing support in both the palace and the armed forces.
But the greater risk to internal stability in Thailand is growing objection to the monarchy, and particularly King Vajiralongkorn. The unpopular monarch spends most of his time in Germany, only returning to Thailand for brief stays. Moreover, his decision in 2016 to appropriate the assets of the Crown Property Bureau (roughly USD70bn) as his personal property now angers many ordinary Thais who have suffered blows to their economic security over the past year.
There is very little chance that the Thai monarchy will be abolished or that Vajiralongkorn will be forced to abdicate, nor are protestors demanding that. Instead, they are pushing for the world’s richest mon-arch to be excluded from receiving funds from the national budget. However, frontal protests against the monarchy have led to the formation of royalist counter-groups that will also be in full force when demonstrations pick up. This could lead to a return of red shirt-versus-yellow shirt urban warfare, similar to 2008-09 in which the country was immobilised for several weeks.
Although attacks by Hezbollah and Islamic State-affiliated groups have been occasionally launched or attempted in Bangkok over the past decade, the most persistent terrorist threat in Thailand remains the separatist struggle in the country’s four southernmost provinces, which have Muslim majorities. The current conflict has spanned two decades, but casualties have abated in recent years with sporadic peace talks between the umbrella group Barisan Revolusi Nasional (BRN) and the government.
COVID-19 has had a dampening effect, and no talks have been held since March 2020. In April 2021, the BRN announced a temporary cessation of hostilities because of the pandemic; this was a tacit acknowledgement of the government’s tighter hold because of the COVID-19 emergency decree.
In February 2021, a bomb blast killed two paramilitary rangers, signalling that violence will likely restart. The intensity of this will depend in part on the central government’s attention to the south in its economic recovery plans. Nevertheless, the conflict will likely be restored to the status quo ante of fight-and-talk, with little diversion from that script in the immediate future.
In December 2020, the US Treasury Department placed Thailand on its ‘watch list’ for suspected cur-rency manipulation, finding that the country had met two of the three criteria for unfair currency poli-cies to gain advantage in international trade. Taiwan and India were also added to the list, while Vi-etnam was designated as a currency manipulator. Thailand may have been spared this designation be-cause of the impact of COVID-19 on the economy in 2020; for example, the collapse of the tourism in-dustry lowered the current account surplus from 7% to 6%.
Despite COVID-19, however, Thailand’s bilateral goods trade surplus with the United States continued to grow, exceeding the USD22bn limit set by the Treasury Department. Washington has urged Bang-kok to allow the baht to appreciate. However, a sharp rise would hamper recovery in the export sec-tor, and the Bank of Thailand has announced measures to restrict appreciation to 5% in 2021. Siam Commercial Bank estimates a 3-5% rise of the baht against the US dollar for the year.
TREND ▲
In September 2020, the parliament approved a mildly expansionary budget for fiscal year 2021 (October-September), which is expected to nudge the budget deficit up to 7.1% of gross domestic product, over 6.7% in fiscal year 2020.
Total spending for fiscal year 2021 is set to increase to roughly USD105bn, up from USD102.2bn in fiscal year 2020. The projected increase is mostly for Eastern Economic Corridor projects, to increase the country’s competitiveness. Several factors could influence spending, including the government’s ability to disburse funds from the stimulus packages as well as political unrest.
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