Thailand – Slim Majority an Impediment

Although the holding of long-delayed elections in March 2019 cleared the way for the restoration of something resembling civilian democratic rule, the government continues to be headed by former coup leader Prayut Chan-o-cha, and with the military-appointed representatives in the upper legislative chamber claiming effective veto power over leadership appointments and changes to the constitution, civilian control of the government is more apparent than real. The unwieldy governing coalition led by the PPP claims a narrow two-seat majority, and depends on the backing of the Democrat Party, the BJP, and numerous smaller parties, whose support is not entirely reliable.

An ongoing legal case against opposition leader Thanathorn Juangroongruangkit could improve the government’s position. Thanathorn’s has already been disqualified from sitting as a member of Parliament over his alleged violation of electoral rules, and he faces prosecution on sedition charges linked to his role in anti-government protests in 2015, and a conviction could result in the dissolution of his party, the FFP, which won more than 80 seats in the 500-member House of Representatives in its first-ever election.

Despite the evident political risks, Thailand is viewed as a favorable alternative to China for firms looking to avoid becoming caught up in the US-China tariff war, and Prayut’s government is taking steps to address some of the weakness of the business climate by streamlining regulations and eliminating bureaucratic obstacles.

Slowing growth is undoubtedly a challenge for the new government, but it is one that it can address by spending more on infrastructure development and social programs until global conditions are more conducive to supporting a stronger contribution from export-oriented manufacturing. In the near term, the fallout from the US-China trade dispute will hold real GDP growth to just 2.8% in 2019, but increased FDI will put a floor under the slowdown, and could bump the annual growth rate above 3% next year. Officials are especially keen to steer investment toward the Eastern Economic Corridor, where new energy, transport, and property development projects are advancing the government’s goal of transforming the area into a regional manufacturing and services hub.

Since 1979, The PRS Group Inc., has been a global leader in quant-based political and country risk ratings and forecasts. This commentary represents a sneak peek from our upcoming political risk reports. For more information please contact us at (315) 431-0511 and sales@prsgroup.com, or explore a subscription to PRS Online and/or ICRG Online today to receive political risk updates.

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