By Lorenz S. Marasigan and Bloomberg News
BANGKOK’S deadly bomb attack this week is set to hit Thailand’s last remaining growth pillar with travel warnings and canceled trips, adding pressure on authorities to restore confidence and stimulate the economy.
Weaker tourism in the next two to three quarters will probably hurt Thailand’s economic growth, and the explosion could have a longer-lasting impact on visitor numbers compared with previous incidents in the past decade, Standard & Poor’s said on Tuesday. Tourism stocks fell the most on record on Tuesday, while the baht approached its lowest level since April 2009.
“Tourism is the last fully functioning engine of economic growth in Thailand,” said Santitarn Sathirathai, a Singapore-based economist at Credit Suisse Group AG. “Growth in the second half of the year could be weaker, as tourists, especially from China, react swiftly,” he said, adding that the government needs to unveil significant fiscal stimulus.
Almost 25 million foreign visitors flocked to Thailand last year for its white-sand beaches and centuries-old temples, and their spending has helped shore up growth, as manufacturing and exports slump. Now tourism, which accounts for about 10 percent of the economy, is under threat after the blast in Bangkok’s central shopping district on Monday that killed at least 20 people and prompted travel alerts from Hong Kong, the US and the UK.
Tourism could drop 10 percent in the short term, said Adithep Vanabriksha, Bangkok-based chief investment officer at Aberdeen Asset Management Co. Travel agencies in Hong Kong have agreed to cancel all organized trips to Bangkok until the end of August for safety reasons, said Joseph Tung, executive director of the Hong Kong Travel Industry Council.
Another dent
The evening rush-hour blast came hours after a report showed expansion slowed to 2.8 percent last quarter from a year earlier, with the National Economic and Social Development Board cutting its forecasts for gross domestic product growth and exports. Overseas sales are set to contract for a record third straight year.
A second blast on Tuesday sent water flying into the air at a busy Bangkok boat pier, though no injuries were reported.
“Economic headwinds are mounting,” said Jin Lai Chan, a Singapore-based economist at BMI Research. “Investors’ sentiment has been wavering for some time and this attack just puts another dent in Thailand’s armor.” It also increases the probability that the Bank of Thailand will cut interest rates again this year, according to Credit Suisse, Australia & New Zealand Banking Group Ltd., Nomura Holdings Inc. and BMI.
“It reinforces our view of further monetary easing ahead,” said Weiwen Ng, a Singapore-based economist at ANZ, who estimates tourism accounts for 20 percent of the economy, including indirect effects. “Domestic demand—which is already sluggish —will be derailed. Bank of Thailand will also probably allow some baht weakness to help boost exports.”
Strong response
The central bank sees growth risks from China’s slowdown and drought, according to minutes of the August 5 policy meeting released on Wednesday. The benchmark rate was held then.
The blast occurred as the government is also distracted by an imminent Cabinet reshuffle, with Prime Minister Prayuth Chan-Ocha saying on Tuesday that he is seeking the king’s approval on a revised list of Cabinet members. It is a “politically sensitive time,” with a new constitution up for a vote in September, Nomura economists said in an August18 note. “The incident could elicit a strong response from the military government which is already under pressure in part due to a weak economy under its watch, raising the risk of the reimposition of martial law, or even an invocation of more sweeping powers if further incidents take place,” Nomura economists Euben Paracuelles and Lavanya Venkateswaran said. “These could prove disruptive to economic activity.”
Big issue
The SET Index rose 0.2 percent as of 10:23 a.m. in Bangkok on Wednesday, while the baht slipped 0.2 percent.
1 comment
Would it be better for Thais to adopt the republican type of government when their monarch finally passes away? This coup d’tat prone nation should emulate the Malaysian model.