Thai economy likely to suffer further with Yingluck toppled and political stand-off continuing
While former prime minister Yingluck Shinawatra faces a five-year political ban, the country is looking at an ongoing economic battle
The gridlock that has stalled Thailand’s government has sent consumer confidence to a near 13-year low and credit ratings companies have warned that prolonged political unrest threatens to damage an already fragile economy.
The governing stalemate remains the biggest risk to Thailand’s economy, which expanded 2.9 per cent last year, central bank governor Prasarn Trairatvorakul said. The University of the Thai Chamber of Commerce released data that showed consumer confidence slipped for a 13th straight month in April. Moody’s Investors Service and Standard & Poor’s said Yingluck Shinawatra’s removal as prime minister was “credit negative” because it may prolong the political crisis and worsen violence that has already led to 25 deaths since late November.
“I think there is a good chance we won’t see any growth rebound towards the year end,” DBS Bank economist Gundy Cahyadi said. “Pressure definitely will be apparent in markets, given the possibility of a credit rating downgrade. And should that happen, one will also start to get worried about potential implication for long-term investors.”
Yingluck, 46, was forced to step down on Wednesday after the Constitutional Court found her guilty of abusing her power in office and may be banned from politics for five years after the nation’s anti-graft agency said the Senate should impeach her for failing to stem losses from a government subsidy programme.
The National Anti-Corruption Commission (NACC) ruled that she was derelict in her role overseeing a rice-subsidy programme that cost as much as US$21 billion according to government estimates.
“Yingluck failed to prevent or stop fraud in the rice-buying programme even after the NACC and other government agencies sent letters to warn her,” Commissioner Vicha Mahakun said.
The rulings may bring anti-government protesters a step closer to their goal of dismantling the political network of Yingluck’s brother Thaksin Shinawatra, who was ousted in a 2006 coup and whose allies have won the past five elections.
Thailand’s opposition supporters have accused the ruling family of crony capitalism, abuse of power and using populist policies to secure the support of rural voters. Demonstrators rallied in Bangkok’s streets yesterday to pressure interim premier Niwatthamrong Boonsongphaisan’s caretaker government to resign before elections that may be held as soon as July 20.
The NACC said there was enough evidence for the Senate to start impeachment proceedings against Yingluck, without explaining how she could be impeached from an office she no longer holds. Yingluck would be banned from politics for five years if three-fifths of the Senate vote to impeach her.
Yingluck endured more than six months of protests led by former opposition politician Suthep Thaugsuban.
Yingluck’s government spent 880 billion baht (HK$209 billion) buying rice from farmers from October 2011 to February 2014, according to the Bank for Agriculture and Agricultural Cooperatives, including about 100 billion baht that hasn’t yet been paid. The government has recouped about 200 billion baht through stockpile sales, according to Ministry of Commerce data. The country accumulated rice reserves of 12.8 million tonnes last year, or about a third of the global export market.
The government programme, which paid farmers above-market rates for their crop to raise rural incomes, was one the main election policies of Yingluck’s Puea Thai party , and she led a committee that oversaw the initiative. Agriculture accounts for 8.3 per cent of gross domestic product in Southeast’s Asia’s largest economy after Indonesia, according to the central bank.
This week’s rulings against Yingluck are likely to further anger her mostly rural-based supporters, known as the “red shirts”, who vowed to protest at her ousting. The group’s leader said yesterday that the red-shirts would avoid clashes that might give the army a justification to stage a coup.
“If they obstruct the election, so be it. No election,” Jatuporn Prompan, who leads the group, said yesterday in an interview with the Voice TV network.
“If they topple the government and there is a political vacuum, so be it. No government. Let’s stay like this and see who can hold on longer,” Jatuporn said, vowing to keep his supporters on the streets until an election is held.
This week’s verdict was the third by the Constitutional Court against backers of Thaksin. In 2008, the court found his allies guilty of vote buying, disbanding their party and banning another 30 executives, including then-prime minister Somchai Wongsawat, Thaksin’s brother-in-law. That ruling came just weeks after the court had ordered a Thaksin ally, Samak Sundaravej, to step down as prime minister for hosting a TV cooking show for which he was paid while in office.
Yingluck said in a televised address after Wednesday’s ruling that she had not breached the law and was unsure if she would continue in politics.
The ruling was a coordinated attempt to “destroy” the ruling Puea Thai party, deputy party leader Phokin Palakul said on the same day.
While Yingluck’s dismissal won’t affect Thailand’s sovereign credit rating, “it raises the risk of violent confrontation that could ultimately involve the military and will make any sort of rapprochement between the opposing sides of Thailand’s political divide more difficult,” S&P said in a report.
The credit-rating agency added that the court’s actions would reinforce the belief among Yingluck’s supporters that “the judiciary is biased toward the establishment – made up of the urban elite, the military and royalists”.
Thailand is rated Baa1 by Moody’s Investors Service, the third-lowest level of investment grade, and an equivalent BBB+ by Standard & Poor’s. India is ranked two steps lower at Baa3 and BBB-.
The red-shirts have announced plans to rally today, while leaders across the spectrum and the army chief have warned a politically divided Thailand is at risk of civil war.
The government has had limited powers since December, when Yingluck dissolved parliament and called elections in a bid to end the protests.
A February poll was invalidated by a court on the grounds the vote did not take place across the country on the same day, something that wasn’t possible as protesters blocked voting in some areas.
The government and the Election Commission have agreed to the new poll on July 20, though a decree has yet to be submitted for royal approval. The Democrat Party has threatened to boycott that vote, as it did in February.
The Democrats haven’t won a general election in more than two decades.
“The reality of the situation is [neither] side [can] have an outright victory,” Democrat leader Abhisit Vejjajiva said yesterday. “It’s time to build on common ground, which are reforms and elections. All sides have to make sacrifices.”