Pyrrhic win may spook investors
Adecision by Thailand’s Constitutional Court to ban the secondlargest opposition party should be a boost for Gen Prayut Chano-cha, junta leader-turned-prime minister. Future Forward’s leaders were among his highest-profile critics. Yet the long-sought-after victory looks pyrrhic.
The former general’s problems have been piling up. Thailand’s flatlining economy, already suffering from the worst drought in decades, is feeling the shock waves from China’s coronavirus epidemic, which has hurt tourism and manufacturing supply chains. Gen Prayut is under pressure over a soldier’s shooting rampage earlier this month, which raised troubling questions over the military’s involvement in business. The premier also stands accused by Future Forward of helping to cover up Malaysia’s 1MDB scandal with the arrest of a whistle-blower, an allegation the government denies.
It’s an unappetising mix for foreign investors, who are already selling out of Thai debt and equities. They have net sold shares worth almost US$1.1 billion (about 35 billion baht) this year, as of Monday, when stocks entered bear market territory. Even the bumper trading debut of Central Group’s retail arm has faltered. The charter court’s decision, with its negative implications for stability and democratic transition, offers another reason to cut and run.
Future Forward was a headache for Gen Prayut from the moment it was set up, in the run-up to the country’s first general election since a 2014 coup d’etat. Led by a 41-year-old, social media-savvy tycoon, Thanathorn Juangroongruangkit, the party promised to overhaul the constitution and reform an economy dominated by a handful of conglomerates. It met with a string of legal challenges but still garnered about six million votes in the disputed March 2019 poll. By the time of its dissolution, the party held 76 seats in parliament out of 500.
Friday’s verdict has clear benefits for the government. The ban on Future Forward’s leaders means some of its seats will be lost, boosting Gen Prayut’s majority. That may make it easier to push some measures through parliament, after embarrassing wrangles over the budget. The decision hasn’t triggered the sort of mass street demonstrations that Bangkok has seen in the past, at least for now.
For investors, though, silencing a credible opposition group is a return to Thailand’s old ways. It’s an avoidable distraction at a time when the government needs to focus on stimulating growth. That means focusing on unlocking budget spending, if the economy is to hit even pale expectations of 1.5% to 2.5% growth this year. Exports for January, released Monday, did better than expected, partly thanks to gold, but there is no guarantee that will continue into February when the impact of the virus will be more keenly felt.
Indeed, the Thai economy barely grew in the last quarter of 2019 compared to the previous three months. A contraction looks almost certain in the first quarter of this year.
Travel curbs are holding back hundreds of thousands of Chinese arrivals and crimping related business, like the sale of condominiums to mainland tourists.
The only positive news for now is the weakening of the baht, whose strength has dented domestic consumption and tourism. The currency, trading at around 31.7 to the dollar, is at its softest since May. If only there were more to cheer.