SINGAPORE, May 12 (Reuters Breakingviews) - Thailand’s elections on Sunday might return opposition parties to power for the first time since 2014, or alternatively deliver a stitched-up military-backed government. A contested result, however, could revive unrest, frightening off foreign visitors and investors. Nor does either side have an inspiring economic agenda.
The $500 billion economy has underperformed regional peers for two decades. The central bank expects goods exports to contract by 0.7% in 2023. Domestic equity indexes are the worst performers in Asia this year, and foreign portfolio outflows reached $1.9 billion by April, ANZ analysts estimate. This is more than a short-term issue. Capital Economics expects GDP growth to average between 2% and 2.5% over the next few decades, well short of the 6% rate it needs to join the high-income country club by 2035, as Thai people aspire to do.
Political change looks imminent. Pheu Thai, the main opposition party led by Paetongtarn Shinawatra, daughter of a former prime minister, and the Move Forward party have significant leads over the coalition led by former army chief Prayuth Chan-ocha, who forcibly overthrew Pheu Thai's government in 2014. Assuming one of these opposition parties wins, it will need to control 376 seats out of the combined 500-seat House of Representatives and the 250-seat Senate to choose a prime minister. If the pro-democracy camp can’t pull that off, the resulting awkward government configuration is likely to stoke resentment.
Pheu Thai claims it can lift annual economic growth to around 5% so long as is in power, which would be nearly double 2022’s low base. Political parties, seeking to seduce rural voters, have also promised lofty hikes to minimum wages and more welfare payments, which bodes ill for fiscal discipline. Paetongtarn wants a three-year moratorium on principal and interest repayments for farmers plus an upgrade of health care benefits.
Higher incomes might ease Thailand’s household debt, which at 87% of GDP is the third-highest in Asia. But the country also needs a productivity boost. HSBC analysts expect revenue at major Thai corporations to grow by only 2% next year – again, well behind neighbours – and Pheu Thai is mulling a 20% tax on private company profits, per a report in the Bangkok Post. Investors may lose no matter who wins this election.
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CONTEXT NEWS
Thai voters head to the polls on May 14 in an election that could end nine years of rule by a conservative pro-military government led by former army chief Prayuth Chan-ocha.
(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)
