Global Economics

The Crisis in Thailand Keeps Dragging Down the Economy


An anti-government protester waves the national flag during a march through the streets in Bangkok on March 26

Photography by Sakchai Lalit/AP Photo

An anti-government protester waves the national flag during a march through the streets in Bangkok on March 26

After a lull, the political crisis in Thailand between Prime Minister Yingluck Shinawatra’s government and its critics has led to violence again in Bangkok. The National Anti-Corruption Commission, which is investigating Yingluck Shinawatra in a case that could lead to her ouster, was targeted in a grenade attack last night. A few hours later, police arrested four people after searching a pro-Yingluck protest camp near the NACC’s compound.

The attack and arrests come at a time when tensions are rising again in the Thai capital. The leaders of the antigovernment protest movement, opposed to both Yingluck and her brother, exiled former Premier Thaksin Shinawatra, are planning a major rally in Bangkok on Saturday, part of an effort to rev up the campaign to force Yingluck to resign.

The NACC could now play a critical role in the battle for control of the Thai government. Yingluck’s opponents are counting on the anticorruption commission to provide them with some momentum through the case against the prime minister, accused of dereliction of duty after allegedly failing to oversee properly her government’s costly program to subsidize rice prices for the nation’s farmers. If the charges lead to an indictment, Yingluck could face impeachment—and that could possibly create a legal way for her opponents to remove her from office without having to rely on the Thai military to launch another coup.

Yingluck, who has been at the helm of a caretaker government since December, when she called for new elections, suffered another setback last week, when Thailand’s constitutional court ruled the February elections were invalid, because not everyone voted on the same day. The vote could have provided Yingluck with a foundation to form a new government, since the opposition Democrats boycotted the voting. And of course, the reason the elections couldn’t take place on the same day nationwide was that antigovernment protesters successfully disrupted the vote.

Still, Yingluck isn’t going quietly. She is now voicing concerns about possible politicization of the corruption investigation against her. The NACC has moved quite quickly, she told reporters today, taking only three weeks to file charges. Yingluck had asked the commission for 45 days to prepare her defense but only got 15, she added. The prime minister expressed concern about being treated “in a just way and the same as other holders of political positions.”

As it fights to survive, Yingluck’s government is also highlighting the negative impact its opponents are having on the kingdom’s economy. Yesterday the head of the Finance Ministry’s fiscal policy office said the government had cut its export growth forecast to 5 percent, down from a forecast of 6.5 percent in December. The Finance Ministry also cut its forecast for GDP growth to 2.6 percent. That’s the third cut in the forecast in three months: In late December, the ministry said it expected growth to be 4 percent, and less than a month later it cut that forecast to 3.1 percent.

One reason for the underperformance is the impact of the unrest on the country’s tourism industry. During the first two months of 2014, which included the Chinese New Year season, which usually attracts many visitors to the country’s resorts, the number of tourists from Asia fell 12 percent, to 2.43 million. Arrivals from Europe jumped 8.6 percent, but at 1.57 million, they’re not enough to make up for the Asians who opted to stay away.

More bad news might be ahead for the economy if the standoff between Yingluck and her critics drags on much longer. “A continued blockage in the formation of a full government, or a government with authority, into the second half of the year could lead us to reassess the rating situation,” Andrew Colquhoun, who heads Asia-Pacific sovereign ratings at Fitch Ratings, told Bloomberg News on March 20.

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Einhorn is Asia regional editor in Bloomberg Businessweek’s Hong Kong bureau. Follow him on Twitter @BruceEinhorn.

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