Thailand’s benchmark equity index fell for a third day in a row this week, closing down 2.06 percent to 1,375.86 on Thursday and reaching an eleven week low. The country is tense with thousands of protesters in Bangkok, the capital, and elsewhere around the country, demanding the resignation of Prime Minister Yingluck Shinawatra following the introduction of an amnesty bill.
In addition, an ancient land dispute has relations with Cambodia simmering again. With parliament in gridlock, Thailand’s internal and external political conflicts are at risk of overheating and threatening the stability of Shinawatra’s government only two years after she was elected.
Events began to spiral downward in October after a controversial amnesty bill was proposed by the ruling party. The bill would have pardoned those in the military and others involved in a coup in 2006 against Prime Minister Thaksin Shinawatra, the current premier’s brother. The pardons would also cover those responsible for the crackdowns on Shinawatra’s supporters in 2010 as well as the political reprisals through May 2012. The opposition, numbering in the tens of thousands, took to the streets against the bill, fearing it would mean the return of Thaksin Shinawatra to Thailand, a deeply held suspicion ever since his sister was elected in 2011.
In a bid to calm nerves, the prime minister said the bill would not be reconsidered if it got voted down in the Senate. After it was, the protesters remained in the streets, however. They are now demanding that Shinawatra resign after previously calling for a general strike and for businesses to stop paying their taxes.
This week the National Economic and Social Development Board, the state economic planning agency, reported that third quarter growth was weaker than expected at 2.7 percent year over year. It blamed collapsing exports, which it expects to be flat for the year versus expectations of 5 percent growth, weak consumer confidence and concerns that an earlier tapering by the American central bank in its easy money policies could result in capital flight. Consumer confidence fell in October to its lowest level in almost two years.
The board also lowered its economic growth forecast for 2013 to 3 percent from 3.8 to 4.3 percent. This was not such a surprise since the export sector is responsible for 70 percent of Thailand’s gross domestic product growth.
The government hopes that a $63.2 billion spending bill on domestic infrastructure projects will provide a boost to the economy but it is stalled in parliament.
The stock exchange is now down 5 percent for the month, making Thailand Southeast Asia’s second worst performer. This puts it behind only the Philippines, down 7 percent, which is recovering from Typhoon Haiyan.
On top of the economic and domestic challenges facing the government, the International Court of Justice in The Hague last week ruled against Thailand’s position in its dispute with neighboring Cambodia over sovereignty of the land surrounding the Preah Vihear Temple located on their border. The dispute goes back centuries and often deteriorated into armed conflict with the most recent skirmish occurring in 2011. Opposition nationalists protesting the amnesty bill have called on the prime minister to reject the court’s decision. They warn against giving up Thai territory to Cambodia.
For now, Cambodia is slowing down talks over the temple, saying it wants to avoid inflaming an already tense mood on the streets of Bangkok and instigate a coup.
With continuing internal turmoil, in addition to delicate relations with Cambodia, there remains substantial risk to economic growth in Thailand as well as to the stability of the Shinawatra government.