Thailand junta tackling sputtering economy

Months of turmoil has brought Southeast Asia’s second-largest economy to its knees, but some say the coup may revive it.

Thailand's tourist figures are expected to plunge 12 percent in May from last year [Rob Kennedy/Al Jazeera]

Bangkok, Thailand – Workers flee their jobs early to not get caught by the military after curfew. Businesses in the usually-bustling shopping and entertainment districts turn the lights down low and lock their doors by 8pm.

Months of Thailand’s political discord have damaged Southeast Asia’s second-largest economy, and now there are fears that last week’s coup d’etat could inflict further damage. The imposition of an indefinite 10pm-5am curfew certainly isn’t helping the situation, with the city’s booming nightlife now shuttered early.

“Our customer numbers have gone way down since the coup last week, especially with the curfew that keeps people away at night,” said Paula Somthong, 47, who manages the Buthip massage and spa off the usually hectic Sukhumvit Road.

Tour operator Thop Nillavong told Al Jazeera his business was equally stagnant, but he expressed optimism it would shoot back up. “It’s been almost the same over the past six months, but I think the coup will improve our situation – I really hope so.” 

Coups and calamities

Some analysts agree the putsch could help the country rebound to the vast economic potential it wields. 

Professor Tim Forsyth from the London School of Economics noted Thailand has lived through other coups and calamities, and the economy always bounces back. He said the military takeover has put a clamp on violence that killed about 28 people since November. 

Paula Somthong, 47, who manages the Buathip massage and spa in Bangkok said customer numbers have dipped amid the curfew [Rob Kennedy/Al Jazeera]

Further bloodshed appeared imminent after Prime Minister Yingluck Shinawatra was removed by a Constitutional Court ruling earlier this month. 

Followers of Yingluck and her brother Thaksin, who was ousted in a 2006 coup, had converged on the capital Bangkok from their homes in the north and northeast after the verdict. Fears were growing that violent confrontations would erupt with anti-government protesters, who had demanded Yingluck’s ouster through months of debilitating demonstrations. 

“The coup will probably stabilise the economy for the time being,” Forsyth told Al Jazeera. “The military government will ensure no violence will continue … which will be welcomed by investors.”

Holding on to power?

However, Forsyth said if the junta fails to put Thailand back on a path towards democracy, the precarious peace and moves at economic stabilisation are unlikely to last. 

“If the [military] government remains in power for much longer, and does not announce a steady transfer of power to elections, then I suspect that violence and resistance will increase again, and will put investors off,” he said.

It still remains to be seen when elections will be called. Chief of the army, General Prayuth Chan-ocha, said earlier this week reforms were needed before any announcement would be made. “We will set up new organisations to reform every aspect that causes problems and conflicts,” he said in a televised address.

A minister in Yingluck’s cabinet – who was on the run after refusing to surrender to soldiers – told a news conference on Tuesday that the nation’s economic system will never recover if the military decides to retain power. Soldiers later entered the news conference and detained Chaturon Chaiseng, the education minister.

“The society will be in a worse economic situation, and that will affect everyone,” Chaturon said, before being led away by troops in fatigues. “If we let these coup-makers go on with their administration … then the impact will be a disaster.”

The junta’s first order of business appears to be revitalising the sputtering economy. 

Thailand’s gross domestic product had been earmarked to grow 4-5 percent in 2014. However, the National Economic and Social Development Board announced in early May that months of political turbulence had wreaked havoc on those rosy expectations. 

The economy sank 2.1 percent in the first quarter of 2014 and it’s now teetering on the brink of a recession. Construction plummeted 12.4 percent, investment plunged 9.8 percent, and manufacturing – Thailand’s economic bread-and-butter – sagged 2.7 percent.

Rolling up the sleeves

In an apparent effort to quell unrest in the northeast, the military has begun compensating 800,000 rice farmers owed some 90bn baht ($2.8bn). 

Tour operator Thop Nillavong said business is stagnant, but he expressed optimism it would shoot back up after the coup       [Rob Kennedy/Al Jazeera]

Yingluck’s government had implemented a subsidy scheme to pay farmers about 40 percent above market value for their grain – another of the populist policies that leaders have used to woo the Red Shirts. 

However, mismanagement and alleged corruption devastated the programme, and payments were halted late last year. The troubled initiative was one of the rallying cries for anti-government protests that firmly took hold last November. 

Forsyth noted the generals were also planning infrastructure development projects as a route to stimulate the economy through foreign investment and job creation. 

Krislert Samphantharak from the University of California, San Diego said other economic moves include setting budget guidelines for next year, and extending a value added tax at 7 percent. Both had been stalled amid the political paralysis. 

He said while economic chiefs had been ousted by the junta, the country has capable hands at the ready to step in.

“Thailand has a strong bureaucratic system, compared to other countries in the region – thanks to the unstable political system – so the continuity of running the economy is likely ensured,” he told Al Jazeera.

Tourism troubles

One sector likely to feel the heat after the coup is the $35bn tourism industry, which accounts for about 9 percent of GDP. Thailand is one of the most visited places in the world with 26.7 million tourists last year, but amid travel warnings issued by dozens of foreign governments, the sector could witness further declines after months of political troubles. Officials are bracing for a 12 percent plunge year-on-year in May alone.

“It has to be seen how long the curfew will continue to be in place and when the political stability resumes,” Krislert said.

While some observers said Thailand’s 12th coup d’etat in its modern history may stabilise its economic slide in the near term, others balked at the suggestion that it could bring any positives. 

“The repression engendered by the coup will negatively affect economic stability,” said Tyrell Haberkorn, research fellow at Australia’s ANU College of Asia and the Pacific. “In the long-term, I also suspect that the departure from the rule of law will cause investors to lose confidence.”

Source: Al Jazeera