Previous Quarterly Editions
Expropriation Risk: 41 39 41 42 Political Violence Risk: 40 40 42 44 Terrorism Risk: 60 58 61 63 Exchange Transfer and Trade Sanction Risk: 42 40 40 42 Sovereign Default Risk: 42 42 42 42
TREND ▲ OUTLOOK ▲
Prayut Chan-o-cha, the former general who led the military junta to power in 2014, is now the country’s first prime minister following a carefully controlled return to civilian rule. He is now focusing on the re-introduction of parliamentary government. His Palang Pracharath Party leads a coalition government that survived its first parliamentary test in October when the 2020 budget of 106 billion dollars passed by one vote. Despite that slim margin, the opposition, which includes the Pheu Thai Party associated with the Shinawatra family and the newer Future Forward Party, will be unable to stop most of Prayut’s legislative agenda from becoming law. Future Forward leader Thanathorn Juangroongruangkit, a 41-year-old billionaire, has become the de facto leader of the opposition, as the Pheu Thai Party is working hard to avoid incurring new legal challenges. This has left Future Forward exposed to a judiciary that is now firmly aligned with the military. In November, Thanathorn was disqualified from his position as an MP after the Constitutional Court ruled that he violated election law by holding shares in a media company while standing as a parliamentary candidate. He will now face a second criminal case for further campaign violations, and this could see him receive a lengthy jail sentence and a ban from politics. At the same time, the country’s election body asked the courts to dissolve Fast Forward for violating campaign finance laws by accepting loans from its founder. In December, Thanathorn responded by using social media to assemble several thousand young supporters at short notice in Bangkok for the largest rally since the military coup in 2014. The authorities made no attempt to prevent it, presumably assuming that the courts will ensure that he cannot pose a serious threat to Prayut. Meanwhile, King Maha Vajiralongkorn has been consolidating his authority through a highly public purge of palace officials and a concerted effort to bring the security and finances of the palace under his direct control. The government continues to face deteriorating economic conditions that are partly due to the China-US trade war but also to delays in government spending that would stimulate the economy. Thailand's manufacturing production index, an assessment of industrial output, declined during the second half of 2019, as did export values. Following growth of 2.4% year-on-year for the third quarter, the National Economic and Social Development Council government lowered its growth forecast for 2019 to 2.6%, substantially below the central bank prediction of 3.8% made at the start of the year. In addition to the 6% spending increase proposed in the 2020 budget, the government has been scrambling to create a new economic stimulus programme to supplement the stimulus package worth 10 billion dollars that was enacted in August. This includes 1.5 billion dollars to encourage home ownership and a similar amount to support rice farmers.
TREND ▲ OUTLOOK ►
Land expropriation delays continue to obstruct projects along the Eastern Economic Corridor (EEC). This is the flagship infrastructure scheme meant to transform the eastern provinces of Chachoengsao, Chonburi and Rayong into technological and manufacturing hubs. The delays are, in part, related to fierce local resistance to EEC-related expropriation. Potential changes to the Foreign Business Act currently being considered by the government are not likely to include a relaxation of foreign ownership restrictions, at least not during 2020. The arbitration process under the Thailand-Australia Free Trade Agreement between Kingsgate Consolidated, an Australian mining company, and the Thai government continues, with Kingsgate claiming 750 million dollars following the closure of its Chatree gold mine in 2016. The government says it acted on environmental grounds, while Kingsgate argues that the mine was expropriated. The opposition has made clear that it will not support any payment of compensation.
With the advent of civilian rule, public assembly and dissent are now once again legal, making possible the December demonstration in Bangkok by Fast Forward. In October, the head of the army publicly warned Thanathorn against contemplating any ‘Hong Kong style’ protests against the government, and he showed in December that his supporters could assemble peacefully. No more protests are planned for early 2020, but further harsh verdicts against his party would raise the prospect of violent demonstrations. Local protests against the government’s EEC plans may well increase in the first half of 2020, however, although the impact outside specific localities will be minor.
Three Malay-Muslim alleged militants from the southern province of Narathiwat are now on trial for the small bomb and arson attacks in Bangkok in August, and there were no similar incidents during the remainder of 2019. However, in November, insurgents carried out attacks against two security checkpoints that killed 15 people, the largest loss of life in a single day since the insurgency began in 2005. The government has appointed a new chief negotiator to manage the stalled peace talks with separatist organisations in the south and has confirmed that Malaysia will remain the facilitator for the talks, but it is not clear when they will resume. Islamic State and other militant Islamist groups do not appear to be involved in the insurgency.
TREND ▲ OUTLOOK ▼
In October, Washington suspended duty-free benefits under its Generalized System of Preferences (GSP) for Thai exports worth 1.3 billion dollars, including all seafood products, on the grounds of insufficient protection for labour. Although the announcement was unexpected, in the past five years Thailand has been subject to warnings from both Washington and Brussels related to human trafficking and labour conditions. Beyond the loss of preferential status there is no risk of trade sanctions, however. The central bank ended 2019 with its benchmark interest rate at 1.25%, citing financial stability, but an 8% appreciation of the baht during 2019 has put pressure on both exports and the crucial tourism sector.
TREND ► OUTLOOK ▲
The Fiscal Responsibility Act passed in 2018 now limits the amount of off-budget borrowing available to the government, but slowing growth combined with the government’s stimulus efforts will push up the need for more borrowing during 2020. Public debt currently stands at 42% of GDP, well within the legal cap of 60% established last year, but some 15% of this is now related to struggling state-owned enterprises.
Return to contents Next Chapter