Thai economy faces uncertainty after King’s death

Thai economy faces uncertainty after King’s death
The recently deceased King Bhumibol Adulyadej was a guarantee of Thailand’s economic stability, despite weak growth and weak investment. Analysts at Capital Economics have raised concerns the Thai economy may now face some turbulence, but others disagree.

"The highly revered king has been an important unifying figure in the country," said London-based Capital Economics.

"The king has helped add some legitimacy to the current military government. Without him, there are a number of times over the past decade where the country could have been plunged into civil war," the analysts added.

The 88-year old king ruled Thailand for seven decades.

Thailand has been suffering from weak growth and lack of investment. With possible political turmoil on the horizon, the country’s safe haven of tourism may be hit as well.

“The lack of investment is undermining the economy's future productive capacity. The bottom line is that it is difficult to be upbeat about Thailand's medium-term outlook until the political picture becomes clearer," analysts said.

According to the World Travel and Tourism Council, tourism makes up 10 percent of the Thai economy and employs 5.4 million people.

On Friday, however, the Thai baht was strengthening against the dollar, trading 0.38 percent higher. Thailand’s SET index was ailing this week on reports of the king’s worsening condition, got a boost on Friday, up over 4.5 percent.

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Other analysts say the transition of power in Thailand will be quick and won’t hurt the economy.

"We expect the royal succession to designated heir Crown Prince Maha Vajiralongkorn will be stable and that market volatility around the king's death will not be long-lasting," Eurasia Group said.

The impact on the investment environment will be "relatively minor" and won’t last more than 100 days of mourning, it added. Thai companies are likely to postpone launches of new projects for the period, according to Eurasia Group.

"We have only seen two or three days of net outflows from the local equity and bond markets and the sizes are not very big," said Singapore-based Nordea Markets' chief analyst Amy Yuan Zhuang. She added however the outflows could grow.

Although bars could remain closed for a few days, airports will not be shut down, and things will return to normal quite soon, according to an officer at a Western embassy in Bangkok, quoted by Reuters.