Thai Leader Defies Calls to Quit as Border Spat Escalates
(Bloomberg) -- Thai leader Paetongtarn Shinawatra looks poised to brazen out a political crisis engulfing her government, with a cabinet expansion to keep her coalition intact and a tougher stance in a simmering border dispute with Cambodia.
The prime minister on Sunday made clear her intention to stay on, despite speculation that a key party in her ruling alliance was pushing for her resignation. Her Pheu Thai Party said she will neither resign nor dissolve parliament.
The government will move forward with a focus on building political stability, handling national security threats and carrying out its policies, Paetongtarn said in a post on X, after meeting with leaders of her coalition partners. She urged the Thai people to unite behind the government and the army.
'The unity and solidarity of the coalition government will serve as a vital foundation for the Thai people to come together,' she said. 'It will help us navigate this sensitive moment with strength and succeed in defending our sovereignty and preserving the honor and dignity of our nation and its people.'
The crisis was triggered by Paetongtarn's comments in a leaked phone call with former Cambodian leader Hun Sen in which she appeared critical of the Thai army. The episode caused the conservative Bhumjaithai Party to quit her coalition, reducing its majority to about 255 seats in the 495-member parliament.
Her resistance to the subsequent calls for her to resign signals that her strategists are confident of her administration's survival, at least for now.
Part of the key to her survival would be to lock in support of smaller parties through a cabinet expansion that's been made possible by the exit of eight Bhumjaithai ministers. Their party, with 69 lawmakers, quit the government in the wake of the phone controversy after squabbling over policies for months.
The smaller parties 'have not exited the alliance and have signaled willingness to remain if cabinet positions, which have been freed by Bhumjaithai's departure, are allocated to their satisfaction,' said Peter Mumford, Southeast Asia Practice Head at Eurasia Group. 'Pheu Thai will try to cling on in the very short term at least.'
Paetongtarn could also be helped by an internal rift in the ultra-nationalist United Thai Nation Party that has been demanding her resignation. The meeting with coalition partners on Sunday suggests a cabinet reshuffle may be imminent.
Even if the 38-year-old prime minister survives for now, it may only be a temporary reprieve. She faces a barrage of legal challenges that seek to oust her citing ethical standards or lack of qualifications. The prime minister's immediate predecessor was ejected through a court ruling and previous governments run by two of her family members were thrown out by military coups.
While political upheavals are nothing new to Thailand — the army has staged about a dozen successful coups since the end of absolute monarchy in 1932 — Paetongtarn's troubles couldn't have come at a worse time. The trade-reliant economy is on course for its worst performance since the Covid pandemic, hobbled by the highest household debt in the region and the threat of steep tariffs on exports to the US.
In addition, the US attack on Iran over the weekend threatens to further disrupt global energy markets.
Prolonged political turmoil in the face of those headwinds, and rising street protests, are likely to keep foreign investors wary of the nation's already battered financial markets.
Thai stocks are at a five-year low, having tumbled almost 25% since the start of the year — the worst performance among major equity markets. On Monday, UBS Group AG downgraded Thai stocks to neutral from overweight, citing recent political uncertainty.
Still, further losses may be limited as the selloff 'already somewhat reflects subdued expectations for GDP and corporate earnings growth,' according to Christopher Leow, chief investment officer at Asia Principal Asset Management in Singapore.
'We are taking a longer-term view and looking for opportunities to buy high quality companies that have low linkages with political uncertainty, resilient earnings growth and high free cashflows, like healthcare and petrochemical companies,' Leow said.
There are also lingering concerns that an extended political impasse or rising public unrest could prompt the military to step in, though the army chief said last week it was 'committed to democratic principles.'
'Military intervention risks will rise if there is sustained street demonstrations or prolonged parliamentary stalemate, so the emerging protest movement, with demonstrations planned for the coming days, will be a key watchpoint,' Eurasia's Mumford said.
A public apology from Paetongtarn and a visit to troops to express solidarity last week have somewhat calmed public anger. And Paetongtarn has vowed to deal more firmly with Cambodia in the border standoff.
Over the weekend, the Thai army closed a key border crossing, sparking a tit-for-tat move from Phnom Penh, restricting trade and mobility. Cambodia also announced a suspension of all fuel and gas imports from Thailand from Monday.
Tensions between the two neighbors have simmered since a border clash in May in the disputed Chong Bok area that left a Cambodian soldier dead. Both sides have since reinforced troops, while Phnom Penh has imposed some trade curbs. Diplomatic efforts have so far failed.
--With assistance from Eduard Gismatullin, Kevin Dharmawan and John Cheng.
(Updates with UBS downgrade of stocks in 14th paragraph.)
More stories like this are available on bloomberg.com
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