BANGKOK: Thailand’s economy shrunk 0.6 percent year-on-year in January to March, data showed on Monday, as the kingdom’s festering political crisis battered consumer confidence and frightened off tourists.
The contraction is the first since the last three months of 2011, when the country was hit by massive flooding, and comes as opposition protesters press for the removal of a bloodied caretaker government.
The National Economic and Social Development Board (NESDB) also slashed its growth outlook for 2014, forecasting 1.5-percent to 2.5-percent expansion, down from a previous estimate of 3.0 percent to 4.0 percent.
Consumers reeled in their spending “due to increasing concerns over the domestic political situation” that has seen nearly seven months of anti-government protests, a prime minister toppled and street violence that has left 28 people dead and hundreds wounded.
Southeast Asia’s second biggest economy remains without a fully functioning government, cramping state spending and investment in key infrastructure projects and prompting the NESDB forecast reduction.
The Thai economy in 2014 “is likely to grow at a slow pace as a result of the economic contraction in the first quarter” while the “political uncertainty” will also limit expansion, the board said in a statement.
The kingdom had enjoyed a reputation as “Teflon Thailand” for its enviable record of economic resilience in the face of the last eight years of political upheaval as well as devastating floods in 2011.
But Fitch Ratings has warned that its “‘BBB+” sovereign credit rating could be clipped if the political deadlock continues through the second half of this year.
‘The stakes are rising’
“The stakes are rising,” Capital Economics warned in a briefing note. “Private sector confidence is likely to remain dire until there are at least some signs that the crisis is moving towards a resolution. And without a functional government, public spending will stay shackled,” it added.
Consumer confidence has slumped to its lowest level in more than a decade and tourist arrivals dipped by around eight or nine percent in February and March as foreign investors nervously watch the political crisis unfold.
The ruling party has staggered on despite a controversial court ruling this month that saw premier Yingluck Shinawatra thrown out off office along with several cabinet ministers.
She was swiftly replaced by Niwattumrong Boonsongpaisan who is facing pressure to step down as caretaker leader in favour of a premier appointed by the Thai upper house.
Anti-government protesters are calling on the part-elected, part-appointed Senate to invoke a clause in the constitution to remove the government and name a new premier.
Senators are mulling the case for an appointed leader, although critics say such a move has no legal basis.
Thailand has been scored by a deep political divide since 2006 when Yingluck’s billionaire brother Thaksin was ousted in a military coup but retains a major influence from overseas, where he lives to avoid jail for a corruption conviction.