Thai economy remains stable

Thailand’s business sector has had many years to prepare for this tragic day. Source: IHA

The death of Thailand’s King Bhumibol Adulyadej is raising further questions about the kingdom’s creaking economy.

Analysts fear his death could send Thailand into turmoil and deepen economic problems while the kingdom suffers from feeble growth and limited investment and is failing to keep up with Vietnam and Malaysia.

Bangkok’s stock market dropped 5 per cent this week as worries mounted over King Bhumibol Adulyadej’s health and the baht lost 2 per cent against the US dollar.

The new Thai constitution, approved by a murky referendum in August, ensures that the military and unaccountable elites can heavily influence any new government. More than 70 per cent of state spending, according to the World Bank, is devoted to Bangkok and its surrounding provinces, and political power is heavily centralised with one of the world’s widest inequality gaps. Some estimates say the richest 0.1 per cent of Thais own nearly half of the kingdom’s assets.

Thailand had been high on the list of risky markets for investors because of fears over Bhumibol’s health and the aftermath of his death, said Alex Wong at Ample Capital in Hong Kong. But he said the recent sell-off in Thai stocks had been relatively orderly.

“I think we will probably see some more weakness, but I am not so bearish,” Wong said.

Investment growth has averaged just 3 per cent during the last decade, which is the slowest rate of any significant Asean economy, analysts estimate.

Tourism makes up around 10 per cent of the economy, providing around 5.4 million jobs, the World Travel and Tourism Council estimated.

A Bloomberg editorial argued: “The junta has laid out a 20-year plan to achieve a fully developed nation, in part by tapping high-tech growth engines such as biotechnology, robotics and the internet of things. This well-meaning scheme will remain a fantasy, however, unless the government overhauls the education system and invests more in schools and skills programmes in under-served parts of the country.”

The king’s years of ill-health have given the authorities ample opportunity to prepare for this day and some analysts believe the transition will be well-managed.

“Government agencies are somewhat better prepared for this event than is commonly reported,” the Eurasia Group wrote. “We expect any market volatility around the king’s death will be short-lived because the succession will be politically and institutionally stable.”

Other assessment have been less positive.

“The king has helped add some legitimacy to the current military government,” reported Capital Economics. “Without him, there are a number of times over the past decade where the country could have been plunged into civil war.”