Previous Quarterly Editions
Expropriation Risk: 44 44 41 39 Political Violence Risk: 46 42 40 40 Terrorism Risk: 58 58 60 58 Exchange Transfer and Trade Sanction Risk: 42 44 42 40 Sovereign Default Risk: 43 42 42 42
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The official results from the March 24 general election, the first to be held since the military took power in a coup in 2014, were only released in May once the coronation of King Maha Vajiralongkorn had been completed. They showed that a seven-party coalition led by the main anti-junta Pheu Thai Party (PTP) just failed to achieve a majority in the 500-member House of Representatives but won more seats than the pro-military Phalang Pracharat Party (PPRP). However, the military-designed constitution now gives the Senate a key role in choosing the prime minister. As the 250-member Senate is hand-picked by the military-led National Council for Peace and Order, the junta will ensure that Prayut Chan-o-cha, a former general, continues as prime minister and that the military remains the dominant force in Thai politics. However, unless the PPRP is able to put together a coalition of smaller parties to give it a working majority in the House, Prayut may find it difficult to pass key aspects of his agenda. Having previously relied as prime minister on sweeping powers to issue orders until a new government was elected, he may struggle to reconcile himself to parliamentary deal-making and a world of heated debates and no-confidence motions. The new administration's first test will be the budget for the 2019-20 fiscal year that begins in October, with the opposition expected to go on the offensive over the relative allocations for military spending and social welfare. However, a minority government led by Prayut could rely on its built-in support in the Senate to secure legislation affecting the political process or concerning important state affairs. In addition, the military has been using the courts to put pressure on opposition parties. In one example, the founder of the new Future Forward Party that won 30 seats and is a substantial part of the PTP coalition has been charged with a range of crimes related to his ownership of shares in a media company. However, despite the changes to the political landscape after the election, there will be policy continuity and some consensus on economic issues, with all political parties keen to reinvigorate an economy that has seen average growth of just 3% in the last five years. The Asian Development Bank now estimates growth will be 3.9% for 2019, slightly down from its projection of 4.1% at the start of the year following a fall in exports during the first quarter. Thailand’s economy is highly exposed to the current global economic slowdown, as well as to the growing trade tensions that began in the second half of 2018.
The Eastern Economic Corridor (EEC) is the flagship infrastructure scheme meant to transform the eastern provinces of Chachoengsao, Chonburi and Rayong into technological and manufacturing hubs. However, several key road, rail, and bridge projects are being delayed because of problems securing the necessary land along proposed routes. Last year the government began to use legal powers to claim farmland for new infrastructure, but this is quickly becoming a political and economic problem for the new government. In addition, opposition parties in the new legislature are likely to demand a reassessment of several infrastructure projects. Increased scrutiny means that some will be delayed and others curtailed. An Australian mining company, Kingsgate Consolidated, is taking the government to arbitration under the Thailand-Australia Free Trade Agreement following the closure of its Chatree gold mine in 2016. The government says it acted on environmental grounds, while Kingsgate is claiming that the mine was expropriated. With an ostensibly civilian government now in place after the election, the authorities will lose the special powers granted under section 44 of the interim constitution, which was used to close the Chatree mine.
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Following the substantial controls on parties opposed to the military both before and during the election campaign period, there have been no major anti-government protests since the final results were declared. This is consistent with the lack of any substantial protest movement since the start of military rule in 2014. It is not clear to what extent the military will tolerate a genuine return to freedom of assembly under the civilian government, and there appears little appetite at present to test its response to large-scale demonstrations.
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After a lull in February, attacks against security forces and volunteer defence units in the southernmost provinces spiked again in March. However, the violence seen since the start of the year remains low in the context of the 15-year insurgency. The overall trend is downward, with the current uptick linked to the stalled peace process. This is expected to resume under the new government. The new southern Muslim party, Prachachat, won six seats in the recent election, suggesting that it may have a part to play in new talks. There have been no recent attacks outside the region, and no significant terrorist incidents since the bomb attack on a temple in Bangkok in 2015.
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The baht was the best performing currency against the dollar in the second half of 2018 and has maintained its strength despite the uncertainty surrounding the election period. The central bank is expected to keep interest rates at 1.75% for the time being. While sanctions are not an issue at present, the way in which the military handles the transition to civilian rule will have a bearing on the country’s international relations. If the PTP is prevented from legitimately forming a new government and opposition parties continue to face legal challenges, questions of legitimacy will be raised in Brussels and elsewhere with a potential impact on trade. Washington, however, has already committed to a resumption of arms sales once the new government takes office.
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Thailand’s public debt currently stands at 42% of GDP, well within the 60% legal cap established in 2018, and with only 3.5% held in foreign currency. Although government figures suggest that public debt will reach 50% within five years, this will mainly be due to stimulus investment in infrastructure improvements. Thailand’s foreign reserves have stabilised at 205 billion dollars after a slight dip during 2018.
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