Is "Teflon Thailand" running out of steam?

[buksida]

One year ago, Thailand was going through a new period of political turmoil. Growth was penalized, but the country managed to avoid a recession, and financial strains have been contained.

But the political crisis is far from resolved, and announced structural reforms, if effectively implemented, will take time. Since coming to power in May, the military has made ​​economic growth one of their main priorities, along with fighting corruption.

In the very short term, the stabilization of the political situation and the announced measures helped to support activity in the second half. However, only structural reforms and a true resolution of the crisis of legitimacy will enable the country to regain its place as a regional leader, both economically and politically.

Thailand no longer a natural region leader
Moreover, the consequences extend far beyond the internal political, since Thailand has lost its role as a natural regional leader. Since the coup of September 2006, international relations and the country's defense policies are primarily related to issues of domestic policy, resulting in major geopolitical decisions being delayed.

As Thailand remains idle, other countries in the region, like the Philippines, Myanmar, Vietnam, and even Indonesia have promoted policies to woo foreign investors.

Since Thai diplomacy has apparently no clear guideline, Thailand seems to have lost its role as a regional leader, and as major partner and founding member of ASEAN. Today there is no evidence that the decisions taken today by the military authorities will be maintained when the country will move back to parliamentary democracy.

Scratches in the Teflon
In past decade, political instability has had no significant impact on the business, and the economic fundamentals have weathered the political and external shocks.

The military has relied on the economy to gain legitimacy, nationally and internationally. Several measures have been adopted since taking office in late May 2014, to support the activity and restore the confidence of foreign investors.

As in previous episodes, the prolonged period of political turmoil has not led to massive outflows of capital, whether held by domestic investors or foreign. For now, financial risks remain low. Foreign debt remains at a low level, or 36% of GDP.

But some scratches have appeared in the "Teflon Thailand" economy : repeated and unsolved political problems are now taking a toll on Thailand's growth.

No massive outflows of capital, but ...
The Japanese, who have been the largest investors in Thailand in recent years, are now threatening to invest elsewhere in the region.

Japan’s charge d’affaires to Thailand Mitsugu Saito pointed out that although Thailand is still the most important Japanese investment destination in Asean, several competitors are now emerging, such as Indonesia and Vietnam.

On the other hand, banks were encouraged to facilitate access to credit for SMEs and the Board of Investment, a government agency responsible for attracting and approving FDI projects, was reopened as early as May, after six months of closure.

The economy, which is now more dependent on tourism, could also suffer a prolonged fall in revenues from the sector if the country's image continued to deteriorate. Tourism receipts accounted for 11.5% of GDP in 2012 and over 13% in 2013, after 8% on average between 2008 and 2011.

Full Story: TBN

Thought: There wont be much confidence from any investors while the country's leaders are carrying all the guns.

[Name Taken]

In my opinion, Thailand seems to be an export based/focused economy that has a few wealthy elites that take the lion's share of the profits derived from those exports. Tourism revenue/income seems to be just icing on the cake.

[Big Boy]

13% GDP sounds like more than icing on the cake to me.

[dozer]

The company I work for has being doing business with Thailand from just after the Second World War.
My father worked here for the company from 1947 to 1952 and my older sister was born here in 1948.
However now with the emergence of more stable alternatives in the region, it has been decided to move our engineering office out of Bangkok
The engineering office is first rate, but our clients are becoming more and more concerned about instability.
It’s ironic as the most concerns came from companies operating in the Middle East, which is hardly the home of democratic governments.
Some of our Thai staff will move with, but I do not see them lasting.
It does not affect me, as I mostly work from home now.
There will be a token presence, but nothing like before; it is such a shame, end of an era.

[Bristolian]

13% GDP sounds like more than icing on the cake to me.

I can only agree that 13% is substantial and not to be forgotten but.... Exports account for 70% ( or at least did in 2013) if tourism fails it's a disaster. If exports fail ... I'll leave it to you to decide the appropriate phrase!