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The Star
35 minutes ago
- Business
- The Star
Thailand's economy teeters as political turmoil threatens recovery efforts
BANGKOK: Thailand's economy is already on the ropes. Consumption has remained tepid despite a government stimulus programme, few of its economic engines are firing, and uncertainty wrought by US President Donald Trump's reciprocal tariffs means that the Thai economy could grow just over 1% this year. Now, South-East Asia's second-largest economy faces a fresh challenge: a new round of political chaos that can bring down Prime Minister Paetongtarn Shinawatra or her ruling Pheu Thai party. "We are currently in a period of economic downturn, with many issues affecting us," Visit Limlurcha, vice chairman of the Thai Chamber of Commerce, told Reuters. "This could make things even more complicated." The most significant short-term concern is the passage of a 3.78 trillion baht (US$115 billion) budget for the 2026 fiscal year, which starts on Oct 1, that must pass through parliament over the next few months. That process could get stalled if Paetongtarn, who is under siege for her handling of a festering border row with neighbouring Cambodia, dissolves parliament and triggers fresh elections. "If parliament is dissolved before the budget is passed, the process will be delayed significantly," said Prakit Siriwattanaket, managing director of Merchant Partners Asset Management. Thailand's economy has lagged regional peers as it struggles under high household debt and borrowing costs, and sluggish demand from China, which is also a key tourism market. It expanded 2.5% last year, and growth could be further halved this year due to US tariffs, Finance Minister Pichai Chunhavajira said last month. Thailand's stock market has been the worst performing bourse in Asia so far this year, down 23.4%. Industrial sentiment also hit its lowest in eight months in May, even as consumer confidence dropped to a 27-month low. There is a clear need to press ahead with government spending, which has dropped by over 38% annually during April-May 2025, OCBC economists Lavanya Venkateswaran and Jonathan Ng said in a report on Thursday, warning of a "double whammy" for the economy if both government expenditure and exports weaken. Amid the ongoing tumult, Paetongtarn may be able to hang on to her premiership and a coalition led by her Pheu Thai party could retain its majority, albeit in a weaker position compared to its previous grip on the parliament. Such an arrangement will prolong political instability and raise the spectre of street protests, which have been part of previous crises and could hit one of Thailand's key remaining economic engines: tourism. "I'm worried. I don't want the situation to cause people to take to the streets," Thienprasit Chaiyapatranun, President of Thai Hotels Association, which represents around 1,000 hospitality establishments, told Reuters. "If they take to the streets, it will hit tourism." Activists - including those who have in the past agitated against Paetongtarn's father, the divisive former premier Thaksin Shinawatra - met on Friday (June 20) to plan a major protest next week, and demanded the prime minister's resignation. A government lacking full authority may also struggle in ongoing trade negotiations with the United States, which has threatened to impose a 36% tariff rate on imports from Thailand, said Natapon Khamthakrue, an analyst at Yuanta Securities. "The United States certainly would not want to talk to a government without full power or with few votes," he said. Some business chambers and analysts are, nonetheless, holding out hope that a political resolution can be found quickly, minimising damage to the Thai economy, which has been rattled by multiple coups in the last eight decades, including two against governments led by the Shinawatra family. "Although the economy is no stranger to political uncertainty," OCBC's economists said, "the timing could not be more inconvenient considering external headwinds." - Reuters
The Star
36 minutes ago
- Politics
- The Star
People's Party rules out forming government with Anutin as PM
BANGKOK: People's Party leader Natthaphong Ruengpanyawut (pic) stated on Friday (June 20) that there is no possibility of the People's Party and Bhumjaithai Party forming a government with Bhumjaithai leader Anutin Charnvirakul as Prime Minister. Natthaphong made these comments following the political turmoil sparked by the leaked phone call between Prime Minister Paetongtarn Shinawatra and Cambodian Senate President Hun Sen. He noted that Paetongtarn has lost public confidence, and resignation is not a viable option under the current circumstances. He stated that the only solution is to dissolve the parliament, adding that with the remaining prime ministerial candidates, he believes none can provide a way forward for the country. He suggested that coalition parties would negotiate with Pheu Thai to secure as many ministerial positions as possible, rather than focusing on the country's issues. Despite this, he acknowledged that the current Pheu Thai government remains united but would operate with a fragile majority, undermining investor confidence. Natthaphong commented that the opposition might hold a no-confidence debate against the government, and the opposition is ready to fully perform its role as a check on power, pressuring the prime minister to dissolve parliament and return power to the people. Asked whether the People's Party would form a government with Bhumjaithai Party and nominate Anutin as Prime Minister, he firmly replied, 'Not at all. Our prime ministerial candidate list has been clear from the start—we cannot support anyone for the role at this time to resolve the situation.' On the issue of unity, Natthaphong expressed that it should always be present, but he opposed using the current internal political conflict and the national situation to fuel populist, nationalist sentiments that could call for extra-constitutional actions. He stated that the prime minister's visit to Ubon Ratchathani to work with the 2nd Army Region Chief was appropriate and emphasised the importance of maintaining civilian government leadership over the military. He expressed hope that the prime minister would perform her duties well to restore public confidence. When asked if ongoing protests might lead to actions outside the law, he stated that while people want a change of leadership, there are various ways to achieve it. 'The method we disagree with most is the call for extra-constitutional power leading to a coup,' he said. 'If the people truly want a way out, I believe the most appropriate solution is a new election, allowing the people's voice to decide the country's future.' When asked about claims from the government side regarding a "snake in the grass" within the People's Party, Natthaphong clarified that he had previously invited anyone with such claims to reveal names for fairness, so that the concerned parties could respond. He personally expressed confidence in all his fellow party members and reaffirmed that there is no truth to the allegations. He further stated that the formation of a government depends on the equation at hand, noting that at present, either the People's Party, Pheu Thai, and Bhumjaithai Party must unite to secure a majority and move forward. Natthaphong emphasised that the People's Party's stance remains clear: it will not join the government. - The Nation/ANN
CNA
an hour ago
- Politics
- CNA
CNA Explains: What's next for Thailand as calls grow for PM Paetongtarn to resign?
SINGAPORE: Thai Prime Minister Paetongtarn Shinawatra is facing growing calls to resign after just 10 months in power. Her leaked phone call with former Cambodian leader Hun Sen in the midst of both countries' border row led to the exit of a key coalition partner on Wednesday (Jun 18), leaving her government hanging by a thread. In the phone call – which Hun Sen recorded and shared with about 80 people including members of his party's standing committee – Paetongtarn is heard referring to Thai Second Army Region Commander Lt Gen Boonsin Padklang as 'an opponent'. The remark has triggered her major coalition partner, the Bhumjaithai party, which holds 71 seats, to withdraw from the government, reducing the coalition's strength to 261 seats as of Friday. She needs at least 248 seats for a majority. The United Thai Nation Party, which holds 36 seats, is reportedly weighing its position and has called for the 38-year-old prime minister to resign. Political analysts said Paetongtarn's leadership is now 'untenable', describing the leaked conversation as 'deeply compromising' to her position, and damaging to Thailand. 'I think there's no way she's going to last,' political scientist Thitinan Pongsudhirak of Chulalongkorn University told CNA. What is likely to happen in the next few days? Paetongtarn and her Pheu Thai party 'will do all they can to stay in power' and this could potentially involve the premier's father, former Prime Minister Thaksin Shinawatra, observers said. 'Paetongtarn and especially her father Thaksin will try to persuade the coalition members to stay on board, perhaps by offering them additional ministries (Cabinet posts) or other incentives,' said Duncan McCargo, President's Chair in Global Affairs at Singapore's Nanyang Technological University (NTU). 'They will also work behind the scenes to try and convince the country's elite actors that they still offer the most effective means of maintaining control of the government, and that any other scenario risks instability and potential protests,' McCargo added. The remaining coalition partners – which consist of 10 parties, namely United Thai Nation, Kia Tham, Democrat, Chart Thai Pattana, Prachachart, Chart Pattana, Thai Ruam Palang, Thai Liberal, New Democracy and Thai Progress – will likely take into consideration the 'popular sentiment', as well as pressure from the military and the palace, analysts said. Both the military and the palace are key institutions in the country's political landscape. Besides the popular sentiment that has been 'riled up' following the controversial phone call, the military will likely want to have its say in what goes forward, ISEAS-Yusof Ishak Institute's Michael Montesano said in an interview with the programme CNA Asia First. Amid public calls to withdraw from the coalition, key partner parties Kia Tham, Prachachart, Democrat, and Chart Thai Pattana have decided to remain following party meetings on Thursday. The United Thai Nation, the second largest party remaining in the coalition, has said that it will only make a definite decision after holding talks with the prime minister. It has, however, called for Paetongtarn to resign, reported local media. News site Khaosod English reported the party is proposing that Pheu Thai's third-ranked candidate, Chaikasem Nitisiri, replace Paetongtarn. Meanwhile, the Democrat Party on Friday issued a statement following a meeting of its executive committee the previous day. It confirmed its decision to remain a coalition partner in the government to continue managing the country's affairs and address the ongoing issues Thailand faces, media outlet The Nation reported. Party spokesperson Jenjira Rattanaphian admitted there were differing opinions but emphasised the party remains unified. Reports, however, noted that at least three of its deputy leaders said during the meeting that they might reconsider their roles within the party in light of the political situation. Chart Thai Pattana party leader Varawut Silpa-archa – who is also the Minister of Social Development and Human Security – has also emphasised national security and the need for a strong government, reported The Nation. 'Regarding the situation at the Thai-Cambodian border, a strong government is crucial for ensuring territorial sovereignty. Therefore, we wish to speak with the prime minister first as we still lack complete information,' Varawut was quoted as saying by The Nation, referring to the leaked phone conversation. What happens if the United Thai Nation Party or others quit? Pheu Thai will need to do everything it can to 'salvage the government's parliamentary majority in order to prevent a dissolution of parliament', Ken Mathis Lohatepanont from the Department of Political Science at the University of Michigan in the United States told CNA. Lohatepanont outlined two possibilities for the ruling party: Replace Paetongtarn with another candidate to preserve its alliance with the United Thai Nation Party, or retain Paetongtarn and risk United Thai Nation's departure. If United Thai Nation does withdraw, the ruling coalition will lose 36 seats and become a minority government. Analysts told CNA that while a minority government is possible, it would face significant challenges in passing key legislation. Without a majority, Pheu Thai would have to lobby for opposition support on key measures such as the budget and this risks triggering broader street protests, McCargo from NTU said. 'It makes (Pheu Thai) hostage to the preferences and whims of small parties. It will likely be a very dysfunctional minority government that cannot get anything done,' said Thithinan. 'There will be constant squabbling, constant crisis.' Lohatepanont, who is a PhD candidate, agreed. 'Being dependent on disloyal MPs is a fraught business and leaves the government highly vulnerable to future switches in loyalties,' he said. Observers have said it is unlikely for the opposition bloc to form an alternative coalition. 'The People's Party holds the most seats in the opposition bloc but it is hard to see how the People's Party and the Bhumjaithai could cooperate,' said ISEAS fellow Eugene Mark. People's Party leader Natthaphong Ruengpanyawut said on Friday there is no possibility of his party and Bhumjaithai forming a government with the latter's leader, Anutin Charnvirakul, as Prime Minister, reported The Nation. In the 2023 election, Move Forward – the forerunner of the People's Party – won the most seats but was blocked from taking power by an unelected senate, paving the way for second-placed Pheu Thai to cobble together a coalition and form the government. What happens if Paetongtarn resigns? If Paetongtarn resigns – or if her party opts to replace her to keep United Thai Nation or other parties in the coalition – Pheu Thai is likely to nominate a new candidate for prime minister. 'On paper, a PM nominee needs a simple majority of 248 votes out of 495 to secure premiership,' said Mark, who is co-coordinator of the Thailand Studies Programme at Singapore's ISEAS. Observers predict that Chaikasem, a senior figure within Pheu Thai, is the most likely candidate to replace Paetongtarn should she step down. However, his reported ill health has raised doubts on whether his premiership will be enduring. Chaikasem, a former attorney-general, was one of Pheu Thai's three original PM candidates in the 2023 election. In the wake of the Thai Constitutional Court ordering the dismissal of then-PM Srettha Thavisin in August last year, Paetongtarn was nominated for the role ahead of Chaikasem, a move that analysts said showed the party's "strategy to stand by the youth movement". McCargo and Lohatepanont told CNA that other party leaders could also emerge as contenders to lead a new administration. Among them is Pirapan Salirathavibhaga of the United Thai Nation, who is also Deputy Prime Minister and Minister of Energy. Pirapan, however, commands relatively few Members of Parliament, which would limit his authority within the government, said Lohatepanont. 'I would expect it to be a short-term arrangement where the government works to pass the national budget, and then eventually the House of Representatives is dissolved,' he added. If this happens, Thailand would see its third prime minister since the ouster of Srettha last August. Will there be a snap election? Parliament could be dissolved for fresh elections to be held, observers said. 'If the government truly goes significantly below the minimum governing majority, I would expect a dissolution of parliament to pre-empt a vote of no confidence,' said Lohatepanont. But the crisis will likely damage the Pheu Thai party's standing further, making it even more challenging to head into fresh polls, according to analysts. 'I doubt that the Pheu Thai Party is ready for an election. Their core policy pledges remain unfulfilled, the economy is weak, and Paetongtarn's scandal has only added to their unpopularity,' said Lohatepanont. A snap election may not favour some current and former members of the ruling coalition, including Bhumjaithai, and may instead be to the People's Party's advantage, said Olarn Thinbangtieo, a political science lecturer at Burapha University. 'This is more about pressuring the prime minister to resign than dissolving parliament,' Olarn said. Asked about the possibility of a coup amid the political turmoil, observers said the conditions are not there for the military to seize power. 'The two past coups happened after the democratic process reached a dead end due to elections being boycotted by opposition parties,' Lohatepanont said. Montesano from ISEAS said that the military is 'definitely concerned' by political developments, given the border tensions with Cambodia and the leaked phone call. While the military is 'putting a brave face on things', it has been 'offended very gravely by a prime minister who has accused one of its leading officers as being a member of the political opposition', he told CNA Asia First. 'The essence of this game is to stand back and see how things play out, rather than to be seen taking the initiative in toppling a government or manipulating coalition members again,' he added. There have been multiple coups in Thailand over the last eight decades, including two against governments led by the Shinawatra family. The last coup was in 2014 against Paetongtarn's aunt Yingluck. This is not the first time Paetongtarn has faced pressure to resign. In March this year, she survived a no-confidence vote in parliament after the opposition argued she had been unduly influenced by her father Thaksin. It accused her of tax evasion and mishandling many of the country's problems, including the slumping economy and corruption. Finance Minister Pichai Chunhavajira said last month Thailand's economic growth may slow over the next two years due to steep US tariffs. Industry leaders have expressed growing concern over the political turmoil, warning that it may further weaken the country's economic outlook in the second half of the year.
The Advertiser
an hour ago
- Politics
- The Advertiser
Thai PM faces call to quit to avert coalition revolt
Thailand's embattled Prime Minister Paetongtarn Shinawatra faces the prospect of losing her government's majority as a vital coalition partner looks set to demand her resignation after just 10 months in power. Paetongtarn, the politically inexperienced daughter of divisive tycoon and former premier Thaksin Shinawatra, is fighting fires on multiple fronts, struggling to breathe life into a stagnant economy facing steep US tariffs and under pressure to take a tougher stand on a territorial row with Cambodia that has seen their troops mobilise at the border. The United Thai Nation party, the second-largest partner in her alliance, will demand Paetongtarn, 38, step down as a condition for it to remain in the Pheu Thai Party-led coalition, two UTN sources told Reuters, requesting anonymity because they were not authorised to speak to media. "If she doesn't resign, the party would leave the government," one source said. "We want the party leader to tell the PM as a courtesy." Though Paetongtarn received a boost on Friday with another coalition partner, the Democrat Party, pledging its support, Thailand's youngest premier is still in an untenable position, with her majority hinging on UTN staying in the alliance following Wednesday's exit by the larger Bhumjaithai Party. UTN has not said when it will announce its position. Paetongtarn's battle to stay in power demonstrates the declining strength of Pheu Thai, the populist juggernaut of the billionaire Shinawatra family that has dominated Thai elections since 2001, enduring military coups and court rulings that have toppled multiple governments and prime ministers. But Paetongtarn faces anger and the prospect of an internal revolt over Wednesday's embarrassing leak of a phone call between her and Cambodia's influential former leader Hun Sen - once seen as a Shinawatra family ally - which her critics say posed a threat to Thailand's sovereignty and integrity. During the conversation, Paetongtarn called for a peaceful resolution of the border dispute and disparaged an outspoken Thai army general who she said "just wants to look cool", a red line in a country where the military has a high profile and significant political clout. Political activists met on Friday to schedule a major protest in Bangkok starting on June 28 to demand Paetongtarn resign and coalition partners leave the government. Paetongtarn has not commented on the turmoil in her government and has tried to present a united front on the Cambodia issue, appearing on Thursday alongside military chiefs and vowing to defend sovereignty. The premier will make a morale-boosting visit to military units at the Cambodia border on Friday, where she is due to meet Lieutenant General Boonsin Padklang, the regional commander whom she criticised in the leaked call. Paetongtarn's options for staying in power are limited unless her allies can succeed in behind-the-scenes discussions to stop her alliance crumbling. A snap election could damage Pheu Thai and play into the hands of the progressive opposition People's Party, the largest force in parliament. Thailand's embattled Prime Minister Paetongtarn Shinawatra faces the prospect of losing her government's majority as a vital coalition partner looks set to demand her resignation after just 10 months in power. Paetongtarn, the politically inexperienced daughter of divisive tycoon and former premier Thaksin Shinawatra, is fighting fires on multiple fronts, struggling to breathe life into a stagnant economy facing steep US tariffs and under pressure to take a tougher stand on a territorial row with Cambodia that has seen their troops mobilise at the border. The United Thai Nation party, the second-largest partner in her alliance, will demand Paetongtarn, 38, step down as a condition for it to remain in the Pheu Thai Party-led coalition, two UTN sources told Reuters, requesting anonymity because they were not authorised to speak to media. "If she doesn't resign, the party would leave the government," one source said. "We want the party leader to tell the PM as a courtesy." Though Paetongtarn received a boost on Friday with another coalition partner, the Democrat Party, pledging its support, Thailand's youngest premier is still in an untenable position, with her majority hinging on UTN staying in the alliance following Wednesday's exit by the larger Bhumjaithai Party. UTN has not said when it will announce its position. Paetongtarn's battle to stay in power demonstrates the declining strength of Pheu Thai, the populist juggernaut of the billionaire Shinawatra family that has dominated Thai elections since 2001, enduring military coups and court rulings that have toppled multiple governments and prime ministers. But Paetongtarn faces anger and the prospect of an internal revolt over Wednesday's embarrassing leak of a phone call between her and Cambodia's influential former leader Hun Sen - once seen as a Shinawatra family ally - which her critics say posed a threat to Thailand's sovereignty and integrity. During the conversation, Paetongtarn called for a peaceful resolution of the border dispute and disparaged an outspoken Thai army general who she said "just wants to look cool", a red line in a country where the military has a high profile and significant political clout. Political activists met on Friday to schedule a major protest in Bangkok starting on June 28 to demand Paetongtarn resign and coalition partners leave the government. Paetongtarn has not commented on the turmoil in her government and has tried to present a united front on the Cambodia issue, appearing on Thursday alongside military chiefs and vowing to defend sovereignty. The premier will make a morale-boosting visit to military units at the Cambodia border on Friday, where she is due to meet Lieutenant General Boonsin Padklang, the regional commander whom she criticised in the leaked call. Paetongtarn's options for staying in power are limited unless her allies can succeed in behind-the-scenes discussions to stop her alliance crumbling. A snap election could damage Pheu Thai and play into the hands of the progressive opposition People's Party, the largest force in parliament. Thailand's embattled Prime Minister Paetongtarn Shinawatra faces the prospect of losing her government's majority as a vital coalition partner looks set to demand her resignation after just 10 months in power. Paetongtarn, the politically inexperienced daughter of divisive tycoon and former premier Thaksin Shinawatra, is fighting fires on multiple fronts, struggling to breathe life into a stagnant economy facing steep US tariffs and under pressure to take a tougher stand on a territorial row with Cambodia that has seen their troops mobilise at the border. The United Thai Nation party, the second-largest partner in her alliance, will demand Paetongtarn, 38, step down as a condition for it to remain in the Pheu Thai Party-led coalition, two UTN sources told Reuters, requesting anonymity because they were not authorised to speak to media. "If she doesn't resign, the party would leave the government," one source said. "We want the party leader to tell the PM as a courtesy." Though Paetongtarn received a boost on Friday with another coalition partner, the Democrat Party, pledging its support, Thailand's youngest premier is still in an untenable position, with her majority hinging on UTN staying in the alliance following Wednesday's exit by the larger Bhumjaithai Party. UTN has not said when it will announce its position. Paetongtarn's battle to stay in power demonstrates the declining strength of Pheu Thai, the populist juggernaut of the billionaire Shinawatra family that has dominated Thai elections since 2001, enduring military coups and court rulings that have toppled multiple governments and prime ministers. But Paetongtarn faces anger and the prospect of an internal revolt over Wednesday's embarrassing leak of a phone call between her and Cambodia's influential former leader Hun Sen - once seen as a Shinawatra family ally - which her critics say posed a threat to Thailand's sovereignty and integrity. During the conversation, Paetongtarn called for a peaceful resolution of the border dispute and disparaged an outspoken Thai army general who she said "just wants to look cool", a red line in a country where the military has a high profile and significant political clout. Political activists met on Friday to schedule a major protest in Bangkok starting on June 28 to demand Paetongtarn resign and coalition partners leave the government. Paetongtarn has not commented on the turmoil in her government and has tried to present a united front on the Cambodia issue, appearing on Thursday alongside military chiefs and vowing to defend sovereignty. The premier will make a morale-boosting visit to military units at the Cambodia border on Friday, where she is due to meet Lieutenant General Boonsin Padklang, the regional commander whom she criticised in the leaked call. Paetongtarn's options for staying in power are limited unless her allies can succeed in behind-the-scenes discussions to stop her alliance crumbling. A snap election could damage Pheu Thai and play into the hands of the progressive opposition People's Party, the largest force in parliament. Thailand's embattled Prime Minister Paetongtarn Shinawatra faces the prospect of losing her government's majority as a vital coalition partner looks set to demand her resignation after just 10 months in power. Paetongtarn, the politically inexperienced daughter of divisive tycoon and former premier Thaksin Shinawatra, is fighting fires on multiple fronts, struggling to breathe life into a stagnant economy facing steep US tariffs and under pressure to take a tougher stand on a territorial row with Cambodia that has seen their troops mobilise at the border. The United Thai Nation party, the second-largest partner in her alliance, will demand Paetongtarn, 38, step down as a condition for it to remain in the Pheu Thai Party-led coalition, two UTN sources told Reuters, requesting anonymity because they were not authorised to speak to media. "If she doesn't resign, the party would leave the government," one source said. "We want the party leader to tell the PM as a courtesy." Though Paetongtarn received a boost on Friday with another coalition partner, the Democrat Party, pledging its support, Thailand's youngest premier is still in an untenable position, with her majority hinging on UTN staying in the alliance following Wednesday's exit by the larger Bhumjaithai Party. UTN has not said when it will announce its position. Paetongtarn's battle to stay in power demonstrates the declining strength of Pheu Thai, the populist juggernaut of the billionaire Shinawatra family that has dominated Thai elections since 2001, enduring military coups and court rulings that have toppled multiple governments and prime ministers. But Paetongtarn faces anger and the prospect of an internal revolt over Wednesday's embarrassing leak of a phone call between her and Cambodia's influential former leader Hun Sen - once seen as a Shinawatra family ally - which her critics say posed a threat to Thailand's sovereignty and integrity. During the conversation, Paetongtarn called for a peaceful resolution of the border dispute and disparaged an outspoken Thai army general who she said "just wants to look cool", a red line in a country where the military has a high profile and significant political clout. Political activists met on Friday to schedule a major protest in Bangkok starting on June 28 to demand Paetongtarn resign and coalition partners leave the government. Paetongtarn has not commented on the turmoil in her government and has tried to present a united front on the Cambodia issue, appearing on Thursday alongside military chiefs and vowing to defend sovereignty. The premier will make a morale-boosting visit to military units at the Cambodia border on Friday, where she is due to meet Lieutenant General Boonsin Padklang, the regional commander whom she criticised in the leaked call. Paetongtarn's options for staying in power are limited unless her allies can succeed in behind-the-scenes discussions to stop her alliance crumbling. A snap election could damage Pheu Thai and play into the hands of the progressive opposition People's Party, the largest force in parliament.
Business Times
2 hours ago
- Business
- Business Times
Thailand's economy teeters as political turmoil threatens recovery efforts
[BANGKOK] Thailand's economy is already on the ropes. Consumption has remained tepid despite a government stimulus programme, few of its economic engines are firing, and uncertainty wrought by US President Donald Trump's reciprocal tariffs means that the Thai economy could grow just over 1 per cent this year. Now, South-east Asia's second-largest economy faces a fresh challenge: a new round of political chaos that can bring down Prime Minister Paetongtarn Shinawatra or her ruling Pheu Thai party. 'We are currently in a period of economic downturn, with many issues affecting us,' Visit Limlurcha, vice chairman of the Thai Chamber of Commerce, told Reuters. 'This could make things even more complicated.' The most significant short-term concern is the passage of a 3.78 trillion baht (S$147.9 billion) budget for the 2026 fiscal year, which starts on October 1, that must pass through parliament over the next few months. That process could get stalled if Paetongtarn, who is under siege for her handling of a festering border row with neighbouring Cambodia, dissolves parliament and triggers fresh elections. 'If parliament is dissolved before the budget is passed, the process will be delayed significantly,' said Prakit Siriwattanaket, managing director of Merchant Partners Asset Management. Thailand's economy has lagged regional peers as it struggles under high household debt and borrowing costs, and sluggish demand from China, which is also a key tourism market. It expanded 2.5 per cent last year, and growth could be further halved this year due to US tariffs, Finance Minister Pichai Chunhavajira said last month. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up Thailand's stock market has been the worst performing bourse in Asia so far this year, down 23.4 per cent. Industrial sentiment also hit its lowest in eight months in May, even as consumer confidence dropped to a 27-month low. There is a clear need to press ahead with government spending, which has dropped by over 38 per cent annually during April-May 2025, OCBC economists Lavanya Venkateswaran and Jonathan Ng said in a report on Thursday, warning of a 'double whammy' for the economy if both government expenditure and exports weaken. Amid the ongoing tumult, Paetongtarn may be able to hang on to her premiership and a coalition led by her Pheu Thai party could retain its majority, albeit in a weaker position compared with its previous grip on the parliament. Such an arrangement will prolong political instability and raise the spectre of street protests, which have been part of previous crises and could hit one of Thailand's key remaining economic engines: tourism. 'I'm worried. I don't want the situation to cause people to take to the streets,' Thienprasit Chaiyapatranun, President of Thai Hotels Association, which represents around 1,000 hospitality establishments, told Reuters. 'If they take to the streets, it will hit tourism.' Activists – including those who have in the past agitated against Paetongtarn's father, the divisive former premier Thaksin Shinawatra – met on Friday (Jun 20) to plan a major protest next week, and demanded the prime minister's resignation. A government lacking full authority may also struggle in ongoing trade negotiations with the United States, which has threatened to impose a 36 per cent tariff rate on imports from Thailand, said Natapon Khamthakrue, an analyst at Yuanta Securities. 'The United States certainly would not want to talk to a government without full power or with few votes,' he said. Some business chambers and analysts are, nonetheless, holding out hope that a political resolution can be found quickly, minimising damage to the Thai economy, which has been rattled by multiple coups in the last eight decades, including two against governments led by the Shinawatra family. 'Although the economy is no stranger to political uncertainty,' OCBC's economists said, 'the timing could not be more inconvenient considering external headwinds.' REUTERS
