Focus on Thailand's finances take centre stage
Updated
Thailand's troubled political landscape has affected the economy, with delays to public projects, skittish investors and tourists who decide not to visit because of the demonstrations.
The finance minister says Thailand may have to borrow more money to fund additional stimulus measures.
Presenter: Liam Cochrane
Speaker: Daphne Roth, head of Asia Equity Research at ABN Amro Private Banking
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LIAM COCHRANE: Two-thirds of Thailand's economy is driven by exports, which, as we know, are slowing down amidst the global financial crisis. But the political instabilities of the past week deal a further blow to the confidence of foreign investors and Thai businesses. Daphne Roth is head of Asia Equity Research at ABN Amro Private Banking.
DAPHNE ROTH: Thai economy does depend on exports and of course with the US and the West slowing down, that will be hit. So what most of the other economies are doing is trying to stimulate domestic consumption. And with consumer confidence going down, business confidence going down because of this, you know, political uncertainty, I believe that it could be on the downside.
LIAM COCHRANE: And it's not just that. Thailand has lined up some major infrastructure projects, which should be providing thousands of jobs and financial stimulus, but are being delayed by the turmoil. The biggest project is an ambitious railway development worth more than $A700 million, which would expand Bangkok's elevated network, link cities to ports, and improve connections between neighbouring countries. But for the proposed stimulus to have an effect, it needs to get rolling.
DAPHNE ROTH: Thailand has proposed a lot of infrastructure implementation, but how many or how much of this could be implemented with this uncertainty going on, that remains to be seen.
LIAM COCHRANE: And then there's the damage done to tourism, which accounts for around 6 per cent of Thailand GDP. Scenes of violent riots in the streets of Bangkok have prompted many countries to advise their citizens to avoid travelling to Thailand. Daphne Roth again.
DAPHNE ROTH: And of course with this tension going on, we feel that tourism will be hit too. And I think Thailand not only depends on export but I think, also, it depends on tourism.
LIAM COCHRANE: And if that all sounds a bit bleak, here's some good news. So far, the Thai Government and reserve bank has made the right moves to stabilise the economy, according to Daphne Roth.
DAPHNE ROTH: The bank of Thailand is doing the right thing - they are cutting interest rate. They are doing their part, the government is doing their part to have fiscal stimulus. But, again, as I say, there is a political situation. It just means that a lot of these projects will not be implemented or they will be delayed and that will be a drag on the economy itself.
LIAM COCHRANE: The other positive is that Thailand is unlikely to make any drastic moves, such as rapidly the devaluating the baht - the move that sparked the 1997 Asian financial crisis.
DAPHNE ROTH: I don't think the Thai baht will devalue a lot and, in fact some of these economies, as long as it goes down a little bit, it might help them with the exports. So, at the moment, I don't think so, but longer term it really depends on how protracted this political uncertainty may go on.
