EABC on current situation in Thailand

The announcement of a Coup d’état by the Thai Military came to a big surprise to most observers. It would have been advisable to invest more time for the reconciliation process between the opposing parties. However rumours suggest that there were some urgency to announce the coup. Whatever the reasons behind, European investors hope that the coup will be revoked soon and the country can proceed as soon as possible with a new government.

From an economic point of view we follow the suggestions of the Governor of the Bank of Thailand Mr Prasarn Trairatvorakul, who insisted that the country’s economic fundamentals remain sound and he is expecting a current account surplus despite the slow GDP growth rate. While tourism will be affected on the other hand Thai exports might flourish due to weaker Thai currency. Hopefully the new administration can disburse long withheld funds in particular to farmers from the rice pledging and on other postponed infrastructure projects that will stimulate the economy.

It is important that the new administration under the Military leadership explains clearly to Thai and foreign investors the reasons why the military intervention was necessary. This would lessen the negative review from the international media and foreign governments that Thailand is receiving at the moment. This will certainly have a negative effect on future investments in the country as can be already be seen by some postponements of investment projects and the wait and see attitudes of some Japanese investors.

EABC and the European business community is in particular worried that current Thai EU Free Trade Negotiations might be postponed further. This will reduce Thai exports to Europe since preferential tariffs from the GSP arrangements will expire soon. This will affect especially agricultural products while rice and shrimp farmers are severely hurt. Only if the country can present a reputable government quickly more damage to the Thai economy can be avoided. This might be the biggest challenge for the new administration to restart the economy and drive future GDP growth.

While we hope the military intervention will maintain peace and order and avoid further bloodshed, EABC also expects additional measures to be implemented by the new administration. Corruption must be stopped, transparency measures in particular for public procurement must be implemented, new infrastructure and BOI approved project must be approved quickly while the liberalisation process of the service sector must proceed quickly. To restart the economy the 2015 government budget needs to be submitted and passed without delay. Only the implementation of these measures will guarantee a future growth path for the Thailand’s economy.