Previous Quarterly Editions
Expropriation Risk: 46 46 46 47 ► Political Violence Risk: 58 58 59 60 ▲ Terrorism Risk: 58 55 55 55 ► Exchange Transfer and Trade Sanction Risk: 73 73 55 55 ► Sovereign Default Risk: 27 27 37 47 ▲
TREND ►
Thailand’s latest COVID-19 surge, which began in April, is by far its deadliest. The country now has the fastest-rising rate of infection regionally, at 300 new cases per 1 million people, greater than either Indonesia or India. More than 60% of new cases are outside metropolitan Bangkok, and all but two of Thailand’s 76 provinces have registered infections. The new surge has affected Thailand’s economy and politics and has drawn in the monarchy.
In mid-August, the National Economic and Social Development Council amended its estimate for economic growth in 2021 from 1.5-2.5% predicted in May to 0.7%-1.2%. The Bank of Thailand and Ministry of Finance have also issued estimates in this range. By late August, more pessimistic outlooks were emerging for a second year of negative growth. However, some economic damage from the virus has been offset by recovering global demand for Thai goods, particularly automotive parts, electronics, machine and agricultural products.
Despite the virus, the government in September announced a partial re-opening of business and public activity, to boost the economy. There are also tentative plans to re-open the country to international travel in mid-October, to aid tourism. Some selective tourism has been permitted already.
The COVID-19 vaccination rate hovers near 10%. Failed attempts at vaccine self-sufficiency through local production were abandoned mid-year, when the government joined the international COVAX scheme, accelerated its procurement process for Western vaccines, and accepted vaccine donations from the United States and other countries. To respond to public distrust of Chinese vaccines in the national stock, the health ministry recommended that those who had received the Sinovac vaccine be inoculated with a dose of Pfizer.
The COVID-19 surge, and growing perceptions of government mismanagement of the pandemic, have re-energised the protest movement; since June, major demonstrations have been held that have been met with increasingly harsh reactions from the police. The pandemic’s economic fallout has exacerbated inequalities in Thailand, which are some of the worst in Asia; household debt has climbed to 90% of the Gross Domestic Product (GDP).
The political opposition has made some modest inroads in its list of demands. Parliament has agreed to consider some constitutional reforms, along a narrow band that focuses primarily on election laws that disadvantage large parties and favour smaller (and inconsequential) ones. There is no guarantee that these reforms will be adopted, much less in time for 2024 general elections. It is unlikely that the legislature will touch the more controversial aspects of the constitution, such as the appointed upper house or the special powers bestowed upon the military. Prime Minister Prayuth Chan-ocha survived a third no-confidence vote in early September, and he will likely remain in power for the near-term at least.
Although Thailand has a relatively open economy and attempts to secure greater foreign investment, the risk of expropriation is moderate to high. Assuming COVID-19 wanes, fewer lockdowns and other emergency provisions will lessen the possibility of government closures of businesses. However, the Prayuth administration will look to infrastructure development for economic recovery over the long term. Most expropriation of land and other assets for this purpose will be of Thai-owned rather than foreign assets, but foreign actors are occasionally subject to expropriation.
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 are construction of a sixth Thai-Lao bridge across the Mekong by 2025, announced by the government last October, and the continual possibility of a joint venture with China for a rail link from the Thai-Lao border to Bangkok.
TREND ▲
With the COVID-19 surge not yet under control, growing public discontent over the government’s handling of the pandemic and a re-energised protest movement with fresh ammunition against both the government and the monarchy, the short-term risk of political violence in Thailand has risen since 2021 began. Largest demonstrations have been met with increasingly strong responses from security forces, which could lead to an exponential expansion of violence.
In the long term, the most serious threat to internal stability is growing objections to the monarchy. There is little chance that the monarchy will be abolished or that the king will have to abdicate, and nor are protestors demanding that. Instead, they are pushing for the world’s richest monarch to be excluded from receiving funds from the national budget. However, 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 see a return of red shirt-versus-yellow-shirt urban warfare similar to 2008-09, where Thailand was immobilised for weeks.
Although attacks by Hezbollah and Islamic State (IS)-affiliated groups have been occasionally launched or attempted in Bangkok in recent years, the most persistent terrorist threat in Thailand remains the separatist struggle in the country’s four southern-most 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.
In February 2021, a bomb killed two paramilitary rangers, and a similar attack on a ranger base was made by militants in early August. This signals the restart of the insurgency but at a relatively low level. Although the separatist movement in southern Thailand has persisted for over two decades, it remains primarily a local conflict with few ties to regional or global jihadist groups. The fall of Afghanistan to the Taliban in late 2021 will increase interest in the Thai conflict among both Al-Qaida and IS, but they will have an easier time recruiting local allies in Mindanao, in the southern Philippines.
In December 2020, the US Treasury Department placed Thailand on its watch list for suspected currency manipulation. The baht’s steady weakening is expected to continue through 2021, with a possible exchange rate of 34 baht to the dollar at year’s end. Bangkok has been relatively unfazed by Washington’s decision to place Thailand on the watch list; the Bank of Thailand denies currency manipulation and maintains that it will only intervene to reduce volatility in the baht, which it defines as a fluctuation of 5% or more. A 3-5% rise of the baht against the US dollar in 2021 remains the consensus prediction.
In August, the Thai parliament passed the national budget for fiscal year (FY) 2022, to begin October 1. The total budget outlay is a 5.8% reduction from the fiscal year 2021 budget, in anticipation of continued economic distress. It increases spending to fight the pandemic but slashes funds for the military and education. The spending bill pegs the budget deficit at 700 billion baht (USD20.9bn), an increase of 15% over FY 2021. The debt percentage to GDP is expected to rise to 57% at the end of 2021, up from 50.5% in 2020.
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