SINGAPORE--Thailand s economy is braced for tougher times ahead as the latest political upheaval takes its toll on consumer sentiment, analysts, sellers and buyers said on Tuesday.
In the latest turn of events, Prime Minister Samak Sundaravej declared a state of emergency in Bangkok this morning after overnight clashes in the streets between pro and anti government protesters left one dead and several others injured.
"At this point, the Thai economy does not need this political headwind. It has more than enough stuff to worry about the slowing global growth and the impact of subprime crisis. In terms of macro numbers Thailand has not done too badly - in exports and recovery in investments and production up to now," said CIMB-GK s regional economist Song Seng Wun.
The current ruling coalition, led by the People Power Party (PPP) came to power after elections held in December after 18 months of military junta rule. The economy was in a state of doldrums during the military junta s rule with a significant dwindling in foreign investment.
The PPP is seen as a proxy for former prime minister Thaksin Shinawatra, who was overthrown in a bloodless coup in September 2006, and this has resulted in mass street protests led by the People s Alliance for Democracy (PAD) in a bid to overthrow the PPP and its allies.
Song added that the political headwind would be a setback on macro prospects, resulting in some downside risk in the fourth quarter of 2008 which could possibly stretch into next year.
Other players in the chemical industry echoed this sentiment.
"The foreign direct investment into Thailand will surely take a hit. Who in their right mind would pump money into a country today when you don t even know who the government is tomorrow?" said a producer of sodium silicate with a plant in northern Thailand.
"Consumer sentiment is expected to be weaker as people will use less goods such as detergents. This cautious mindset is due to the political uncertainty combined with the high inflation rates," added the sodium silicate maker.
An analyst from the research arm of stockbroking firm DBS Vickers in Bangkok, who declined to be named, agreed that Thailand s economy would be hurt and that major government projects in the pipeline such as a planned mass transit railway could probably be delayed.
Additionally, the possibility of another coup was not ruled out by industry sources in view of emergency rule being imposed in Bangkok this morning.
"Initially I thought this time it (the protests) should not go that far. However, given the support from unions, some have threatened to shut down airports in southern provinces which led to the prime minister to announce the state of emergency. If things go out of control, the possibility of another coup cannot be ruled out," said the same analyst from DBS Vickers.
"If another coup does take place, the next government may also not last for long given the various factions fighting for power. In the worst case scenario, the military junta could be running Thailand again," said the same sodium silicate maker.
However, some players tried to downplay the significance of the political uncertainty.
Workers at the national rail and possibly other state enterprises are likely to go on strike but this is unlikely to affect private companies, a Thai polymer producer said.
"I don t think workers from the private sector will get involved in the strike because we are too far from the political issues, we are purely investors running a business. This is purely politics and petrochemical is not related to this kind of thing," said the Thai polymer producer.
He added that investor confidence is likely to be affected in the short term and hence the stock exchange was expected to fall today.
One Thai paraffin wax trader said that he would like to join in the strike since business had been very quiet on the Thailand p-wax market.
"This would give me something to do as there are many retirees of my age there, and all I need to do is to find a yellow shirt," he added.
In the latest turn of events, Prime Minister Samak Sundaravej declared a state of emergency in Bangkok this morning after overnight clashes in the streets between pro and anti government protesters left one dead and several others injured.
"At this point, the Thai economy does not need this political headwind. It has more than enough stuff to worry about the slowing global growth and the impact of subprime crisis. In terms of macro numbers Thailand has not done too badly - in exports and recovery in investments and production up to now," said CIMB-GK s regional economist Song Seng Wun.
The current ruling coalition, led by the People Power Party (PPP) came to power after elections held in December after 18 months of military junta rule. The economy was in a state of doldrums during the military junta s rule with a significant dwindling in foreign investment.
The PPP is seen as a proxy for former prime minister Thaksin Shinawatra, who was overthrown in a bloodless coup in September 2006, and this has resulted in mass street protests led by the People s Alliance for Democracy (PAD) in a bid to overthrow the PPP and its allies.
Song added that the political headwind would be a setback on macro prospects, resulting in some downside risk in the fourth quarter of 2008 which could possibly stretch into next year.
Other players in the chemical industry echoed this sentiment.
"The foreign direct investment into Thailand will surely take a hit. Who in their right mind would pump money into a country today when you don t even know who the government is tomorrow?" said a producer of sodium silicate with a plant in northern Thailand.
"Consumer sentiment is expected to be weaker as people will use less goods such as detergents. This cautious mindset is due to the political uncertainty combined with the high inflation rates," added the sodium silicate maker.
An analyst from the research arm of stockbroking firm DBS Vickers in Bangkok, who declined to be named, agreed that Thailand s economy would be hurt and that major government projects in the pipeline such as a planned mass transit railway could probably be delayed.
Additionally, the possibility of another coup was not ruled out by industry sources in view of emergency rule being imposed in Bangkok this morning.
"Initially I thought this time it (the protests) should not go that far. However, given the support from unions, some have threatened to shut down airports in southern provinces which led to the prime minister to announce the state of emergency. If things go out of control, the possibility of another coup cannot be ruled out," said the same analyst from DBS Vickers.
"If another coup does take place, the next government may also not last for long given the various factions fighting for power. In the worst case scenario, the military junta could be running Thailand again," said the same sodium silicate maker.
However, some players tried to downplay the significance of the political uncertainty.
Workers at the national rail and possibly other state enterprises are likely to go on strike but this is unlikely to affect private companies, a Thai polymer producer said.
"I don t think workers from the private sector will get involved in the strike because we are too far from the political issues, we are purely investors running a business. This is purely politics and petrochemical is not related to this kind of thing," said the Thai polymer producer.
He added that investor confidence is likely to be affected in the short term and hence the stock exchange was expected to fall today.
One Thai paraffin wax trader said that he would like to join in the strike since business had been very quiet on the Thailand p-wax market.
"This would give me something to do as there are many retirees of my age there, and all I need to do is to find a yellow shirt," he added.
