The murky consequences of the elections in Thailand pose a risk to the cooling of the economy


BANGKOK (Reuters) – The delays in the final results of the first Thai elections in five years have aggravated the uncertainties facing the slowing economy,

Journalists await the results of the general elections in Bangkok, Thailand, March 24, 2019. REUTERS / Soe Zeya Tun

increase the risk of political stalemate that could interrupt public spending and keep foreign investors away.

Thailand's first elections from a 2014 military coup were thrown into disarray with cheating allegations and both a pro-army party and the opposition claimed to form a government. It may take weeks before the results become clear.

That created hopes for a rapid transition to a stable administration that would continue economic policies and investment projects to maintain the second largest economy in Southeast Asia.

"We believe that political uncertainty will remain high, as it seems that the formation of a government will probably be a long, elaborate and difficult process," said Charnon Boonnuch, economist at Nomura in Singapore.

"This represents a downside risk to growth, as it would weaken investment prospects," he said.

Both the pro-army party trying to keep the coup leader Prayuth Chan-ocha as prime minister and the opposition party linked to the former ex-former prime minister Thaksin Shinawatra said they could form a coalition government

Kobsidthi Silpachai, head of research on the capital markets of Kasikornbank, said that a delay in outlining the composition of the next administration "would have adversely affected the distribution of government capex budgets and would lead to a decline in the speed of money" in the 39; 515 billion dollar economy.

Public spending is already below targets. This is holding back private investment, which is crucial for growth as exports decline and consumption is held back by high household debt.

Initiatives such as the ambitious $ 45 billion Eastern Economic Corridor project to attract investment into the country's industrial estate may be delayed with the transition.

There are also concerns about whether the pro-junta or anti-junta camp is the next government, it will be unstable, which is not good for the economy and for financial markets, the managers said.

"This should put pressure on the Thai stock market over the next 3-4 months," said Kamonyos Sukhumsuwan, manager of Asset Plus Asset Management.

"Even if (pro-army) Palang Pracharat can form a government, which is positive for the market, in the long run there are risks of stability and difficulty in guiding policies".

The Thai stock market ended 0.4 percent on Tuesday, after falling 1.2 percent on Monday, but foreign investors continue to sell shares, having sold a net value of $ 12.9 billion ($ 407.71 million) this year.

On Tuesday the baht eased by 0.2% against the dollar, going against the trend compared to other Asian countries. (EMRG / FRX)

Thailand has experienced its strongest economic growth in six years in 2018, at 4.1 percent, but still lagging behind compared to 6.2 percent in the Philippines, 5.17 percent in Indonesia and 4.7 percent of Malaysia.

For 2019, last week the central bank cut its GDP growth forecast for the second time in three months, to 3.8 percent from 4.0 percent, citing the rise in global risks.

Companies are not too pessimistic, however.

"Investors can only accept who will be the next government if they can do political stability," said Sanan Angubolkul, vice president of the Thai Chamber of Commerce.

"However, they could wait six months to see what the new administration's policies will be," he said. "What they don't want to see is disorder or a coup."

Additional reporting by Chayut Setboonsarng; Edited by Kay Johnson and Kim Coghill

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