The rise of protests in Thailand threaten the country’s economy – yet again. Last week the country slashed its forecast GDP growth figure for the full year. The latest demonstrations in support of an attempt to oust Prime Minister Yingluck Shinawatra cast a shadow over 2014’s growth. The three-week long protest led demonstrators to take over the country’s Finance Ministry in a show of strength. The prime minister will face a no-confidence debate in parliament on Tuesday and Wednesday. Before it comes to a vote on Thursday. Shinawatra faces a grilling from lawmakers over the political and economic uncertainty facing the country.
Among the issues members of parliament will bring up is a much criticized rice subsidy intended to boost rural incomes. Opposition MPs say that the government buying rice at above market prices has deepened the public debt. However, worse may lie ahead for Shinawatra. Farmers, hitherto a bastion of her support could switch sides if the government falls short on a 75 billion baht ($2.4 billion) bond to fund the program. The government hasn’t paid farmers for the rice it has bought since October 1, when the scheme was renewed. The bond is to cover the funding gap. The state Bank of Agriculture and Agricultural Cooperatives (BAAC) had raised only 37 billion baht at the point when book building closed, Reuters reported. Farmers are threatening to take over the Commerce Ministry, too, if they don’t see cash by early December as promised.
In the midst of this week’s turmoil, the Bank of Thailand’s Monetary Policy Committee will meet on Wednesday. The committee is expected to hold the Bank’s benchmark interest rate at 2.5%, as it has done in its three previous meetings. The threat of slowing growth in the absence of an inflation threat would suggest a cut, but concerns about denting investor confidence because of the signal that would send about the impact of the protests — a concern shared by the prime minister — may trump those.
The protesters are unlikely to be able to overthrow Shinawatra’s government. Her Pheu Thai Party and its coalition partners hold a majority in the lower house of parliament. The prime minister has insisted she will neither resign nor dissolve parliament despite growing political pressure.
The question is what will be the economic cost of her hanging on. GDP growth slowed from 5.4% in the first quarter of the year to 2.7% in the third. Both growth and slowing consumer spending will probably be further affected if the protests continue. Meanwhile, foreign investors are growing cautious: Thailand’s economy is becoming, once again, a risky one.