The University of the Thai Chamber of Commerce (UTCC) expects a prolonged delay in the selection of a prime minister and formation of a new government, leading to protests that, if violent, will significantly affect tourism revenue, causing a loss of 500 billion baht, or a one percentage point decline in GDP.
Thanavath Phonvichai, president of the UTCC, said on Thursday the vote to select the prime minister is considered a crucial indicator of Thailand’s economic recovery, citing recent business surveys by the university that reflect concerns about the prolonged formation of the government, which could delay the implementation of new economic policies for recovery.
“Both businesses and consumers are closely watching the prime ministerial selection, which could require several votes,” said Mr Thanavath.
The UTCC predicts minimal economic impact if the selection of a prime minister and formation of a new government happens in August or September, because this falls within the existing budget framework, allowing various investment plans to proceed.
He said if the government formation extends beyond October, the budgeting process may be postponed to the second quarter of next year, which could hinder economic expansion. Local authorities are being encouraged to continue with existing projects, while government agencies should utilise budget allocations to ensure cash flow, said Mr Thanavath.
“If the prime ministerial selection and government formation proceed smoothly without intense protests, enabling the implementation of investment initiatives, the economy could grow by 4%,” he said.
“However, if the selection process and government formation face severe demonstrations, leading foreign countries to issue travel warnings, the number of foreign tourists in the second half of the year could potentially drop by 10 million. This would lead to a loss of 500 billion baht in tourism revenue and a 1% decrease in GDP, which would be undesirable.”
In the first half of the year, Thailand tallied 12-13 million foreign visitors. The UTCC projects visitors to increase to 17-18 million in the second half.
RALLY FEAR
The Federation of Thai Industries (FTI) is worried massive street protests could spark, eventually affecting foreign investment and tourism if the Move Forward Party leader fails to secure enough votes in parliament to become the new prime minister.
“The Thai political uncertainty will likely be prolonged, fuelling fear of protests by the party’s supporters in many provinces. This will mar the image of the country in the international community and deal a blow to investment confidence,” said Kriengkrai Thiennukul, chairman of the FTI.
He is concerned that foreign investors may put off investment here because the political turbulence reminds them of past street demonstrations to overthrow governments, which often ended with coups.
The FTI said Thailand needs to improve its economy as the recovery has been uneven since the pandemic.
The economy is now paced by tourism, said Mr Kriengkrai, with more Chinese travellers visiting Thailand following the reopening of China early this year.
If political differences escalate to violence, it can discourage foreign tourists from coming to Thailand at a time when the country is dependent on that revenue stream, he said.
Many industries, including food and beverage, are benefiting from the ongoing tourism recovery.
“The FTI hopes any political conflicts can be sorted out in parliament. Politicians should think and act for the sake of the country,” said Mr Kriengkrai.
