Thai Consumer Confidence Falls on Political Turmoil
Thailand’s consumer confidence fell for the first time in four months on concern political tensions may derail the nation’s economic recovery.
An index measuring sentiment fell to 70.9 last month from 71.9 in January, the University of the Thai Chamber of Commerce said in Bangkok today. The gauge tracks a nationwide survey of 2,232 respondents.
The Bank of Thailand kept its benchmark interest rate unchanged at a five-year low of 1.25 percent yesterday ahead of a mass rally by anti-government protesters this weekend. The government invoked an internal security law from today until March 23 to control the situation and maintain order.
“Politics is the key concern weighing on confidence,” said Sauwanee Thairungroj, an economist at the university. “We are watching the protest this weekend closely as it will be the key for economic conditions in the next period.”
The government predicted last month the economy may grow as much as 4.5 percent this year after contracting 2.3 percent in 2009. The forecast didn’t take into account any further street protests or violence, and Finance Minister Korn Chatikavanij said Feb. 22 any political unrest that hurts investor confidence may disrupt the recovery.
The United Front for Democracy Against Dictatorship, whose members wear red shirts and support ex-leader Thaksin Shinawatra, has pledged to rally peacefully. Similar demonstrations by the group last year led to riots that were quashed by the military.
Grenade Attacks
Prime Minister Abhisit Vejjajiva, who canceled a trip to Australia because of the planned rally, said yesterday the government is ready to handle the situation and won’t agree to the protesters’ demand for a fresh election totally free credit score.
All commercial banks have tightened their security after grenade attacks at four branches of Bangkok Bank Pcl, the nation’s largest, on Feb. 27, a day after a court seized $1.4 billion of Thaksin’s fortune. A small bomb exploded near Abhisit’s office on Feb. 13.
Thailand’s economy exited a yearlong recession last quarter and may grow 5 percent in the three months through March, driven by rising exports and stronger local consumption, Korn said last month.
Exports, which are equivalent to about 60 percent of the economy, surged 31.4 percent in January, the biggest gain in 18 months. Industrial production rose for a fifth straight month, the central bank said Feb. 26.
This weekend’s protests may cause economic damage of 3 billion baht ($92 million) to 5 billion baht, according to estimates from the University of the Thai Chamber of Commerce. That may rise to more than 10 billion baht if the demonstrations last a week.
“If the situation turns violent and badly hurts confidence, it may shave GDP growth this year,” Sauwanee said. “The economy may grow only 2 to 3 percent from 3 to 4 percent forecast earlier.”