By Samantha Barnes, International Banker
On May 15, two of Thailand’s political parties agreed to form a coalition government, just one day after nationwide election results confirmed that the people had comfortably rejected the ruling status quo. The Move Forward Party and the other major opposition party, Pheu Thai, emerged as the most popular choices for voters, securing 151 and 141, respectively, of the 500 available seats in the House of Representatives, as the military-backed government that had ruled for almost a decade was handed a resounding defeat. But with this coalition dissolved after Move Forward leader Pita Limjaroenrat’s bid to become prime minister was firmly rejected by parliament (the National Assembly of Thailand) and with Pheu Thai’s Srettha Thavisinsworn in for the top job instead, the prolonged political uncertainty Thailand has experienced in recent months could weigh heavily on its economic prospects this year.
Along with Pheu Thai—the party closely associated with former Prime Minister Thaksin Shinawatra—and four opposition parties, Move Forward’s initial coalition government looked set to proceed following its comfortable election victory. But with the Constitution of Thailand 2017 providing the military-appointed, 250-member Senate—along with the 500-member lower chamber, the House of Representatives—with the power to vote for the new prime minister, there was always the possibility that Pita Limjaroenrat would fail to secure enough parliamentary votes to assume the top job. Indeed, with several senators abstaining from the July 13 vote, the Move Forward leader received only 324 combined votes from the two chambers, well short of the minimum 376 votes he required.
Pita Limjaroenrat’s appeal as the country’s next leader was particularly tarnished by his party’s policy of seeking to amend the country’s lèse-majesté laws. According to Section 112 of the Thai Criminal Code, defaming, insulting or threatening the Thai monarchy has been considered a crime since 1908 and carries a penalty of up to 15 years in jail. Although the Move Forward leader confirmed that the amendments to these laws would neither threaten nor politicise the Thai monarchy, the conservatively oriented Thai parliament still took a dim view of Move Forward’s proposals. “There’s a pattern here of establishment pushback against any progressive movement in Thai politics,” Thitinan Pongsudhirak, a political science professor at Chulalongkorn University (Chula), explained to The New York Times in July. “And the pushback comes in different shapes and forms”, including dissolutions of political parties and disqualifications of major candidates, he added.
The Move Forward Party leader was then dealt additional blows to his leadership aspirations when parliament voted 394-312 to block his nomination on July 19, and the Constitutional Court of the Kingdom of Thailand suspended him as a lawmaker after a complaint from the Election Commission of Thailand accused him of violating election laws by holding undisclosed shares in a media company. With his chances of becoming prime minister thus effectively ended, the second-placed Pheu Thai Party subsequently led the efforts to form a coalition government, with property tycoon Srettha Thavisin emerging as the favoured candidate for prime minister. This new coalition did not include Move Forward, however, with the progressive party stating that it would not support Pheu Thai, as doing so would not align with the people’s will as determined by the election.
With parliament electing Srettha Thavisin on August 22 as Thailand’s next prime minister and finance minister, and with Thai King Maha Vajiralongkorn swearing him in two weeks later along with cabinet ministers of an 11-party coalition government, it appears the dust has finally settled after more than three months of distinct political uncertainty in the aftermath of the election. “This government is a people’s government…we are all here as representatives of the people,” the new prime minister declared upon being sworn in. “There are many problems, so we will work tirelessly every day…we will address the demands of the people.”
Among those demands to be addressed will surely be the potentially substantial hit taken by the Thai economy during this prolonged transitional period, with confidence among investors and consumers being damaged at a crucial time during which energy costs are rising and exports are substantially lower than 2022 levels. Indeed, Thailand’s economy reportedly grew by just 1.8 percent in the second quarter, much lower than the 3.1 percent projected by analysts. “The picture is not all wine and roses,” the central bank’s (Bank of Thailand [BOT]) governor, Sethaput Suthiwartnarueput, acknowledged upon the release of the second-quarter figures. “There are some soft spots. Exports have come in weaker than expected due, in significant part, to China’s slowdown. Total spending from tourism has also come in a bit softer due to fewer Chinese tourists than expected.”
According to Sanan Angubolkul, chairman of the Thai Chamber of Commerce, the biggest issue for the business sector as a result of the uncertainty is the delay in confirming the budget for the 2024 fiscal year (October 2023 to September 2024), which in turn has postponed government spending plans for the remainder of the year. With a draft budget calling for 3.35 trillion baht (US$95 billion) of spending already confirmed at the start of this year, the government planning agency now believes that final approval for this budget could be pushed back to as late as April 2024 following the process being put on hold by the outgoing administration. “Arguably, one of the most pressing issues facing the new government would be the passage of the FY24 budget,” Goldman Sachs noted in late August. “Without a new budget, government spending will be very restricted.”
The uncertainty stemming from the delayed budget will also likely frustrate many business sectors seeking to implement new investment projects and long-term planning strategies. Representing around 18 percent of Thailand’s gross domestic product (GDP), the tourism industry could suffer significantly from this delayed budget bill by preventing sales promotions, particularly during the fourth quarter when the country’s peak season for international visitors is traditionally in full flow. “We are afraid of the delay of the 2024 budget, which means the delays in the 2024 tourism promotion budget as well,” Thapanee Kiatphaibool, a deputy governor of the Tourism Authority of Thailand (TAT), told Nikkei Asia in August.
As such, the delay in taking office by the new government could reduce full-year economic growth to “less than 3 percent”, according to Dr. Aat Pisanwanich, director of the Center for International Trade Studies (CITS) at the University of the Thai Chamber of Commerce (UTCC), speaking to the government-owned Thai Public Broadcasting Service (Thai PBS). Investor and consumer confidence levels are also expected to be markedly damaged by the hold-up. “The delay in a new government taking power would impact both foreign direct investment [FDI] and domestic investment, as foreign and local investors would prefer to adopt a wait-and-watch approach, and some may even choose other destinations [instead of Thailand],” said Tanit Sorat, vice-chairman of the Employers’ Confederation of Thai Trade and Industry (EconThai).
Dr. Aat Pisanwanich also noted that political unrest could play a role in further denting Thailand’s economic prospects. Indeed, a poll by the National Institute of Development Administration (NIDA) found that just prior to Srettha Thavisin’s triumphant parliamentary vote, 64 percent of 1,310 Thai respondents somewhat disagreed or totally disagreed with the notion of Pheu Thai forming a “special government” with other military-backed opposition parties. But with the new government having been formed without significant public discontent being observed across the country, the likelihood of tensions flaring up again over the coming months seems increasingly remote.
Nonetheless, the new prime minister has a considerable challenge on his hands if he is to meet the 5-percent GDP growth per annum that the Pheu Thai Party pledged to achieve in its election campaign. Other promises include a handout scheme, raising the minimum wage and tripling the income for farmers. According to a draft copy of an impending policy speech seen by Reuters that is due to be given by Srettha Thavisin to the National Assembly, moreover, the new government aims to give each citizen a 10,000-baht ($282) handout, delay debt payments and lower energy prices in a bid to ease the cost of living and boost the economy. “The policy will trigger economic growth…we will inject the economy with cash so that it reaches everyone and creates opportunities for all,” according to the speech, as reported by Reuters on September 6.