Thai Economy May Stall as Protests Block Lawmakers

By Suttinee Yuvejwattana and Rattaphol Onsanit

Nov. 24 (Bloomberg) -- Thailand’s economy may grow at the slowest pace in at least eight years in 2009 as a global recession cools exports and protesters disrupt parliament, stopping lawmakers from implementing spending plans.

“Growth may go below 3 percent next year if the government can’t function properly,” said Ampon Kittiampon, secretary- general of Thailand’s economic advisory board. “We need the government to run at full speed if we want to survive.”

Thousands of protesters surrounded parliament today, prompting lawmakers to abandon their session and adding to pressure that has hampered the government’s efforts to stimulate the economy by increasing spending. The central bank may lower interest rates next week as companies from Thai Airways Pcl to General Motors Corp. consider cutting jobs to reduce costs.

“Political wrangling between the government and the demonstrators is going to distract policy makers from implementing effective stimulus measures needed to pull Thailand through this global economic slowdown,” said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion in assets. She advises investors to shun Thailand in favor of Singapore and Hong Kong.

The SET Index of stocks fell 2.9 percent in Bangkok and is on course for its worst year since the 1997 financial crisis. The baht slid for a fifth day and is trading at its weakest against the dollar in 21 months as exports and tourist arrivals slow and foreign investors sell the nation’s assets. Consumer confidence is at the lowest level in a year.

Escalating Violence

Southeast Asia’s second-largest economy expanded by 4 percent in the third quarter from a year earlier, the slowest quarterly pace in almost eight years, as the increasingly violent political protests quashed consumer confidence and investment. Growth was expected to be 4.3 percent, according to the median estimate of 19 economists surveyed by Bloomberg News.

With a “functioning government,” Thailand’s economy may expand as little as 3 percent next year, Ampon, head of the National Economic and Social Development Board, said today. That would be the slowest pace since a 2.2 percent rate in 2001 and less than the central bank’s lowest estimate of 3.8 percent.

‘Force Government Out’

“We must force this government out,” said Sirichai Mai- Ngam of the People’s Alliance for Democracy, in an interview with Business Radio this morning. Around 1,500 police are deployed at parliament, government spokesman Nattawut Saikuar said. Military assistance can be called for if needed, he added, estimating the number of protesters at 20,000.

Lawmakers canceled today’s parliamentary session to avoid confrontation and the protesters extended their rallies in Bangkok to the Ministry of Finance, police headquarters and Don Mueang Airport, where the Cabinet meets. Three of four public buses hijacked earlier today to block roads have been retrieved, said Pinate Puapatanakul, director of the Bangkok Mass Rapid Transit Authority.

Two people died and more than 470 were injured when police fired tear gas to disperse protesters when they blockaded parliament on Oct. 7.

“The PAD may try to spark unrest, which could force the government to step down,” said Thitinan Pongsudhirak, director of the Institute for Strategic and International Studies at Chulalongkorn University in Bangkok.

‘Getting Worse’

“The political situation is getting worse and could drag on for a while,” said Han Sia Yeo, a currency strategist at Bank of America Corp. in Singapore. “The question on growth is how deep the slowdown will be and focus now has shifted to the Bank of Thailand cutting rates as early as the next meeting.”

The central bank should consider cutting its interest rate from a 19-month high of 3.75 percent because risks to economic growth have overtaken inflation concerns, Deputy Governor Bandid Nijathaworn said Nov. 11. Policy makers next meet on Dec. 3 to decide on borrowing costs.

Economists in a Bloomberg survey estimate growth of 3 percent in 2009. GDP will expand no more than 4.5 percent this year, the board predicted today.

The government has cut taxes, increased state-controlled bank lending, waived some of the cheapest public transport fares, exempted low-use households from some utility charges, and plans increased spending to spur consumption. More tax reductions will be implemented by December, Finance Minister Suchart Thadathamrongvej said today.

Spending, Exports

“We don’t know how effective the budget disbursement will be,” said Thanomsri Fongarunrung, an economist at Phatra Securities Pcl in Bangkok. “It will take some time to get into the economy.”

Thailand’s exports, which account for about 70 percent of GDP, rose 25.5 percent in the third quarter from a year earlier, slowing from the previous three months’ 26.3 percent pace, and tourist arrivals fell 1.7 percent, according to the central bank. Singapore, South Korea and Australia warn against non- essential travel to Thailand because of political protests.

Eight anti-government protesters were injured in a pre-dawn bomb attack at a checkpoint near Government House on Nov. 22, leaving one in critical condition. It was the second incident in three days, after a Nov. 20 grenade blast at the compound, occupied by protesters since Aug. 26, killed one activist and injured 23.

General Motors will cut 8 percent of its Thai workforce and halt production for a month from mid-December, the largest U.S. automaker said Nov. 20. About 70 percent of its Thai output is exported.

Job Losses

Thai Air, the nation’s biggest carrier, said Oct. 8 that it may eliminate jobs and flights as passenger traffic slides. Kasikornbank Pcl, Thailand’s No. 4 lender by assets, expects 2009 loan growth to be the least in four years.

Bangkok-based protesters include many middle-class Bangkok residents and receives support from the country’s royalist elite, accuses the ruling party of buying votes to win elections and opposes former Prime Minister Thaksin Shinawatra, ousted in a September 2006 coup. At least five people have died as a result of the protests since August.

The ruling People Power Party, led by Prime Minister Somchai Wongsawat, Thaksin’s brother-in-law, won last December’s election on heavy support from farmers in northeast Thailand, the country’s poorest region. It faces dissolution along with two coalition partners amid the allegations of vote buying.

The government aims to amend the constitution, which was drafted by the military after the coup and passed in a referendum last year while half of the country was under martial law.

To contact the reporters on this story: Suttinee Yuvejwattana in Bangkok at suttinee1@bloomberg.net; Rattaphol Onsanit in Bangkok at ronsanit@blooomberg.net