Luca Castoldi, senior portfolio manager at REYL Intesa Sanpaolo Singapore, provided a statement on Thailand, highlighting the country’s political and economic status, as well as its current investing climate. He says
In the midst of a turbulent political landscape, Thailand has seen significant changes in its leadership over the past month. With uncertainties surrounding key policies and a sluggish economy, investors are cautious about the Thai stock market’s potential for growth.
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The past month has truly been a tumultuous one for Thailand politics.
In early August 2024, the Move Forward Party, a youth-oriented opposition party that won the 2023 National elections, was dissolved. The dissolution of the party was on the grounds that they were guilty of threatening the constitutional monarchy, as well as national security.
The party had previously vigorously campaigned against military rule and advocated for bold changes to the laws forbidding criticism of the monarchy, otherwise better known as the “Lèse-majesté laws”. The Move Forward Party’s 151-seats win of the 500 available in the House of Representatives marked a historic moment in Thailand politics. It was the first time in over two decades that Pheu Thai, which has been closely linked to former Prime Minister Thaksin Shinawatra, faced an election loss.
However, Pita Limjaroenrat – leader of the Move Forward Party, still needed parliamentary approval to seal his victory. As fate would have it, he was ultimately blocked from taking power by conservative senators. As a result, Srettha Thavisin, a Thaksin ally, was chosen to become the new Prime Minister shorty after Thaksin returned to Thailand after 15 years in self-imposed exile to avoid corruption charges.
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By GlobalDataThavisin’s swift rise to become Prime Minister was as fast as his fall from grace after only one year in office. His short tenure was notoriously overshadowed by his irresponsible fiscal stance regarding his flagship 500bn baht “Digital Wallet” policy which barely offered anything to the slow the Thai economy with the repeated execution delays it faced. On August 14th 2024, Thailand’s Constitutional Court officially dismissed him after his latest controversy of appointing a former lawyer with a criminal record to his cabinet.
This dismissal forced Pheu Thai to nominate a new, non-democratically elected, prime ministerial candidate on 15 August, ultimately leading to the selection of Paetongtarn Shinawatra, Thaksin’s 38-year-old daughter, who became Thailand’s youngest Prime Minister. Despite her lack of administrative experience, Paetongtarn’s nomination was supported by Pheu Thai and lawmakers alike, and she ultimately won the parliamentary vote of confidence. However, her early start has already been plagued with challenges, particularly in finalising her cabinet lineup due to internal squabbles and extensive background checks on ministerial candidates.
Paetongtarn’s ascension to the premiership brings both opportunities and challenges for Thailand. Her lack of administrative experience has raised concerns about her ability to navigate the complex challenges facing Thailand’s $500 billion economy, the second-largest in southeast Asia (SEA). Many expect that she will rely heavily on her father, Thaksin, and his dual track policy approach – dubbed as “Thaksinomics”, for guidance.
Paetongtarn has pledged to revitalize the economy, but her strategies remain unclear. Inheriting the premiership from a party ally, major policy changes are not expected, and her government is likely to focus on boosting growth while addressing the high costs of living and near-record debt levels of Thai households.
While the impact of the various stimulus policies remains unclear in terms of size and its corresponding multiplier effect, this should not change the planned deficits and bond supply as the initial funding has already been allocated in the 2024 supplementary budget and 2025 budget bill.
The financial markets have also been putting much of their focus on the continuation of Thavisin’s 500-billion-baht digital wallet cash handout program, which had lofty hopes of bolstering the Thai economy to grow annually at 5% like many of her SEA neighbours. With the current dicey political situation coupled with reconsiderations from the National Anti-Corruption Commission (NACC) and the Bank of Thailand (BoT), the digital wallet scheme looms with much uncertainty, to say the least. As a result, investors have indubitably withdrawn some optimism from stocks across the food, retail, and consumer discretionary spaces – industries that would benefit from a consumption uplift with the cash disbursements from the associated scheme.
Averaging below 2% growth over the past decade, Thailand evidently lags its SEA neighbours, Malaysia and Indonesia, which respectively grew at about 4%-5% in 2023. Over the past year, foreign investors have also continued pouring money into those economies, lauding them as SEA’s future growth engines. Against Thailand’s downbeat growth outlook, the current uncertain fiscal and political environment remains an uphill battle for hopeful investors in the Thai stock market.
