Pheu Thai break-up would deal a blow to GDP growth: Study
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Economic growth could be restricted drastically to 4-4.5 per cent this year, from an earlier projection of 5.6-5.8 per cent, if the Constitution Court rules today to dissolve the Pheu Thai Party, leading to political turmoil, according to the University o
In the best-case scenario, gross domestic product will grow by 5-5.5 per cent this year if the court hands down a moderate ruling focusing on certain aspects of the charter-change bill, the UTCC said in a new study.
“Even a verdict that allows some flexibility in charter amendment would lead to some activity by the red- and yellow-shirt camps, as the problem will not be resolved easily,” said Thanavath Phonvichai, director of the UTCC’s Economic and Business Forecasting Centre.
He said the economy faced two main challenges: domestic political instability and the euro-zone crunch. However, the internal political conflict is having a bigger impact on national growth, as it could lead to a change in government, Thanavath said.
Under the UTCC’s worst-case scenario, GDP would grow by only 4-4.5 per cent if Pheu Thai were dissolved. If this happened, red-shirt protests would erupt, the Stock Exchange of Thailand would fall and consumer and investor confidence would be shattered by the rising political conflict, he predicted.
“The Thai economy would be undermined as investment and tourism would go into a ‘wait-and-see’ mode. The euro-zone financial crunch would also dampen domestic growth,” he said.
Alternatively, if the court dismissed the case, GDP would grow by 5 per cent this year, as concerns about political conflict would decline. However, political protests by the yellow-shirt People Alliance for Democracy would be expected.
Thanavath said the political conflict and the European crisis would continue to damage the country’s growth throughout next year.
According to the UTCC’s analysis, political factors have the biggest influence on the Kingdom’s growth, followed by the slowing global economy, concerns about another flood crisis, and fluctuating oil prices.
A 1-percentage-point decline in GDP growth represents a loss of about Bt100 billion to the Thai economy.
