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Stumbling Thai economy lends urgency to junta's revival efforts

by Reuters
Friday, 30 May 2014 10:09 GMT

* Early Q2 data shows economy stumbling in run-up to coup

* Central bank official says should improve slowly under military

* Junta says reforms needed before elections can be held

* Visitor numbers seen hit by months of turmoil

* Curfew could be relaxed further in tourist areas (Recasts and adds data)

By Aukkarapon Niyomyat and Orathai Sriring

BANGKOK, May 30 (Reuters) - Private investment and consumption remained stagnant in Thailand in the run-up to this month's military coup, further evidence of a stumbling economy that will lend urgency to the junta's efforts to get the country working again.

Southeast Asia's second-biggest economy has been battered by political turmoil since late last year, when protesters backed by the royalist establishment launched a bid to oust the populist government of Prime Minister Yingluck Shinawatra.

The government clung to power even after a court forced Yingluck out of office for abuse of power on May 7, but the military ousted it in a coup on May 22, saying a takeover was necessary to restore order and prevent further violence.

Gross domestic product shrank 2.1 percent in the first quarter of 2014 as the lengthy anti-government protests damaged confidence and scared off tourists.

With only caretaker status after dissolving parliament in December for a February election that was later annulled, Yingluck's besieged government had lacked the power to take policy decisions or approve new spending.

A senior central bank official, Mathee Supapongse, said on Friday that under the new military government, "the overall picture looks better, but it's not easy to get to the central bank's economic growth forecast of 2.7 percent".

"We need time to assess the situation first," said Mathee, head of the bank's macroeconomics department. "It's been half a year now and stimulus measures will not come all at once, but gradually, so the effect will rather be felt next year."

He was speaking at a briefing after the release of central bank data that showed private investment in April, the first month of the second quarter, was 4.7 percent lower than in the same month last year and consumption was down 0.8 percent.

It followed data on Wednesday that showed factory output fell for the 13th straight month in April, imports plunged and exports remained weak, underscoring the difficulty the military government faces in averting recession.

"REFORM BEFORE ELECTIONS"

While the United States and other allies have urged a quick return to democracy, Thailand's new military rulers have held out little hope for early elections.

Army chief and coup leader General Prayuth Chan-ocha has spoken of the need for broad reforms before an election. Another top officer said on Thursday that conditions had to be right and divisions healed before a return to civilian rule.

Despite martial law and a ban on gatherings, small peaceful protests against the takeover have been held daily in Bangkok. Activists, spreading word through social media, say they will hold a big show of opposition on the weekend.

A military spokesman said on Friday the junta was "carefully checking" the Internet for the planning of protests.

"If there are gatherings then we will start with negotiations with the crowd but if there is no understanding then we will have to apply the law strictly," deputy army spokesman Winthai Suvaree told reporters.

Thailand has become polarised between supporters of Yingluck and her influential brother, deposed premier Thaksin Shinawatra, and the royalist establishment that sees Thaksin and his populist ways as a threat to the old order.

Despite the animosity of the elite and the Bangkok middle class, Thaksin's popularity in the rural north and northeast has ensured that he or his allies have won every election since 2001.

'PRESSING TASK'

Navy commander Admiral Narong Pipattanasai, the junta member overseeing tourism, told reporters on Thursday that 26 million people were expected to visit this year, down from a targeted 28 million, because of the unrest.

He said revenue from tourism was expected to drop to 1.8 trillion baht ($55 billion). The authorities had been banking on 2 trillion.

"We will do our best to improve the situation," Narong said. "The next pressing task is to build confidence among tourists and to show them that they can travel in Thailand freely ... through campaigns and other methods."

Tourism accounts for about 10 percent of the economy. Many foreign governments have issued warnings about travelling to Thailand, which can affect insurance cover.

Narong said a nationwide night-time curfew, imposed on the day of the coup for seven hours but cut to four hours on Wednesday, could be shortened again in tourist areas. Even in Bangkok, the curfew is not being strictly enforced.

The protests in Bangkok have been rowdy and tense at times but there has been no serious violence. For a day or two after the coup there were also small protests in the northern city of Chiang Mai, but tourist resorts have been unaffected.

The National Council for Peace and Order, as the military junta is known, has imposed rigorous security and censorship, detaining more than 200 people including Yingluck and ministers of the ousted government, though she and many other detainees have since been released.

An ardent supporter of Thaksin and leader of his "red shirt" activists said upon release from detention he was washing his hands of politics for the sake of national reconciliation.

Suporn Attawong, known by followers as "Rambo Isarn" after the northeastern heartland of Thaksin support, said he had not been pressured by the army to quit politics.

"I had a lot of time to contemplate and realised that some of us need to back down for Thailand to be at peace. I have been in politics since I was 20 years old, it's time to step away," Suporn told Reuters on Friday. ($1 = 32.7750 baht) (Reporting by Bangkok bureau; Writing by Robert Birsel; Editing by Alan Raybould and Alex Richardson)

Our Standards: The Thomson Reuters Trust Principles.

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