Thailand Delays Elections Until 2016 Economy Struggles

Last week, the country’s justice minister said martial law would remain in place “indefinitely”. Meanwhile Finance Minister Sommai Phasee has told the BBC that democratic elections could be delayed until 2016.

Yet, the stock market hasn’t plummeted and foreign investors are largely staying put. And, looking over the past 40 years, Thailand has been one of the faster growing emerging economies with a manufacturing capacity that has led it to be dubbed the “Detroit of Asia”.

But, now, the economy is struggling. The latest GDP figures have eked out small increases, leading the government’s economic forecasting agency to predict growth of just 1% this year.

Worryingly, since the coup, tourist numbers have fallen by 20% as travel warnings issued by governments have deterred some visitors. Even more worryingly, demand for cars – a key discretionary good that consumers buy when they feel confident about the future – has dropped by even more, according to the head of Ford in Thailand. But, he and other businesses that I spoke to expect the economy to bounce back and for consumer demand to pick up.

When I asked both domestic and foreign businesses if a sustained recovery was possible if elections don’t take place next year, the almost uniform answer was it was political stability that mattered.

For those peering in, it’s an unusual state of affairs. When a military junta overthrows a democratically elected government, usually investors and businesses stay away. Yet, in Thailand, I heard that the frequency of coups and continued economic growth have led businesses to be sanguine. The big caveat, though, was that violence and civil conflict change the picture.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza