Thai crisis: Severe impact on economy, bourse

Thai protests_Arno MaierbruggerThe worsening political tensions in Thailand and the prospects of a “shutdown” of the Thai capital Bangkok starting from January 13 have rocked the country’s economy and its financial market.

Thailand’s benchmark stock index SET plunged more than 12 per cent in December 2013. The Thai baht plummeted to multi-year lows, dropping almost 6 per cent against the US dollar and even more against the euro since November. Exports have contracted, and tourism – which contributes about 7 per cent or roughly $25 billion of the country’s GDP – is starting to take a hit as booking are cancelled, flights reduced and many countries issued travel warnings for Thailand.

The main concern is that the protests starting from January 13 could get out of control and become violent. Protesters have threatened to cut power and water supply to government buildings and possibly disrupt communication infrastructure. However, they assured that the city’s two main airports, Suvarnabhumi and Don Mueang, as well as transport hubs would not be sealed off.

The government said that the Bangkok shutdown and continued protests could cost the country $4 billion in economic and factual damage, in addition to the $2.1 billion that already have been lost since November 2013. Protest leaders rejected this and said that it would only have “a slight impact” on the economy.

Meanwhile, the Stock Exchange of Thailand said it will continue operating on January 13 and all parties have their own back-up staff, computer systems and locations to support trading in the case of emergency. However, trading is expected to remain weak.

Shopping centers and operators of shops and convenience store chains said that they are “monitoring the situation very closely”, but affirmed that they are well stocked. Malls are planning to remain open but consider “protective measures” and closing immediately on the day of the massive demonstration if there is any bloodshed.

The Thai energy ministry reminded transport organisations to stock up fuel. Around 100 petrol stations in the city will be blocked during the protests.The transport ministry said that at least one million commuters will run into difficulties during the siege.

According to the Thai Bankers’ Association, financial institutions in Bangkok have sufficient cash reserves at branches and ATMs to cover all withdrawals. Banks have not considered to close their branches near the rally sites yet.

For the tourism industry, the political situation is likely to cause a significant drop in arrivals in January, especially as the Bangkok siege coincides with the Chinese New Year. For the first quarter, Chinese arrival are expected to drop 60 per cent from 900,000 compared with the same period in 2013. Bangkok would be hit the hardest with a 70-per cent fall, while Chiang Mai, Pattaya and Phuket would decline 40 per cent, said the Thai-Chinese Tourism Alliance Association.

The political strife has also caused a big drop in travelers from Japan, Hong Kong, South Korea and Taiwan. This situation is expected continue until the second quarter of 2014. Many conference and meeting have been cancelled. There were also reports that travelers from Hong Kong had been asked to buy life insurance before entering Thailand.

There is a probability that the embattled government might issue an emergency decree if protests escalate. The decree would require troops to assist police officers in “handling” anti-government protesters.