Chayawadee Chai-anant, who serves as one of the lead figures in the Bank of Thailand, recently drew attention to the fact that political turmoil is a substantial contributor to the concerning state of the nation’s economy alongside global economic uncertainty and the elevated cost of living. She further mentioned that this political instability has the potential to disrupt the flow of funds allocated for state departments, thereby potentially jeopardizing the nation’s economic stability.
She pointed out that the magnitude of this impact hinges heavily on the length of the delay in establishing a functioning government. Chayawadee reinforced her statement by expressing that an unusually long delay could seriously undermine investor confidence.
The inability of the eight-political-party alliance led by Move Forward and Pheu Thai to form a government post-May’s election mainly due to objections from senators is a case in point. An idea that has been proposed by a few members of the coalition is to postpone the establishment of a new government for a further 10 months, which would coincide with the term completion of the current Senate.
Switching focus to the economic forecast, Chayawadee reported a drop in Thai exports by 5.9% in June. However, she asserted that the Bank of Thailand has projected an optimistic upturn in the economic landscape towards the end of the year.
She associated this decline in exports to an overall global economic deceleration and the less than satisfactory economic revival of China. Despite this, Chayawadee highlighted a silver lining within the tourism sector, which continues to boost a dormant economy. With 2.24 million tourists choosing Thailand as their destination for the month of June alone, further indicators such as travel bookings and accommodation searches suggest that foreign tourist arrivals might continue to climb for the remainder of the year.
In terms of currency fluctuations, Chayawadee pointed out political instability as a significant reason for the baht losing ground against other regional currencies in June. Besides, the baht also experienced a drop against the US dollar.
However, all was not bleak as the baht saw an upward trend in July, fueled by the expected policy rate increase by the US Federal Reserve. Chayawadee mentioned that despite these challenges, Thailand’s economic outlook in the second quarter saw a slight improvement from the first quarter. This incremental trend is expected to persist into July, owing in no small part to the improvements in the country’s tourism and service sectors.
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