Thailand’s economy is in danger of contracting in the first and second quarters and continuing its sluggish trend for another two or three years due to the political impasse, warns a former Bank of Thailand chairman.
A pedestrian walks past a 3D art display on the skywalk at the Ratchaprasong intersection in Bangkok. The Tourism Authority of Thailand has joined with retailers to organise the Living Art Festival 2014 until June 8 to stimulate shopping sentiment amid the stagnant economy. PATIPAT JANTHONG
Virabongsa Ramangkura, a former deputy prime minister and central bank chairman, said polarised politics and refusal to adhere to the constitution and rule of law have formed the basis of the economic slowdown.
"If we continue to fight like this and there is an absence of political stability, then the economy will slow down gradually and collapse," he said.
A dearth of public investment will lead to a lack of private investment in terms of infrastructure development, denting the country's competitiveness in a globalised era, said Mr Virabongsa.
The National Economic and Social Development Board will next Monday announce GDP growth for the first quarter.
Mr Virabongsa said there was no supporting sign to alleviate the economic slowdown in the absence of both a House and Senate speaker, while a military coup would worsen the situation.
The protracted political impasse will lower consumer confidence and dry up investment, he warned.
However, a coup is not likely to occur due to several factors including divided opinions within the military, Gen Prayuth Chan-ocha’s pending retirement, repercussions from the red shirts and negative feedback from the international community, Mr Virabongsa said.
He does not expect the central bank’s monetary policy to support economic growth, saying there was no improved investment outlook in sight and corporate loan extension remained weak.
It is possible that all sides might stop their political agenda and reconcile once the economy is in a dire situation, Mr Virabongsa said.
The property market is not expected to record sound growth this year, as consumer purchasing power has waned, said Anant Asavabhokhin, chairman of Land and Houses Plc.
He said the absence of a functioning government would deteriorate consumer confidence and halt public investment.
Mr Anant expects slightly negative growth for the property market this year.
However, growth in Chon Buri province remains sound on the back of tourism and industry.
Meanwhile, the state-owned Government Savings Bank has shifted its lending focus to corporate customers after falling demand for consumer loans amid the GSB's concerns that soaring household debt is damaging retail customers' repayment ability.
Acting president Tachaphol Kanjanakul said corporate loans are targeted to account for 70% of the GSB's lending portfolio this year compared with less than 30% in the past.
Thailand's household debt-to-GDP ratio rose to 82.3% at the end of last year from 77.3% in 2012 due largely to the Yingluck Shinawatra government's consumer-driven measures, particularly the excise tax rebate scheme for first-time car buyers.
Like its peers, the GSB has trimmed its lending growth target to 4.5% this year from 7% previously following the economic doldrums, Mr Tachaphol said, adding that it must extend new loans worth 70-80 billion baht to achieve its target.