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Thai Economy Expected to Improve Following the Easing of the Political Situation

May 23, 2014 Destination Thailand No Comments Email Email

The enforcement of martial law is expected to have only short-term effects on the Thai economy. The private sector also believes that the Thai economy will improve after the political situation eases.

Secretary-General of the Office of the National Economic and Social Development Board Arkhom Termpittayapaisith urged all agencies involved with economic affairs to continue to work in order to tackle the country’s economic problems, in tandem with efforts by responsible agencies to resolve political problems.

He said that, despite short-term effects on the economy, martial law would produce positive effects as well, since it would show to the international community Thailand’s ability to control the political situation, thus ensuring that it does not escalate and impact national security or the safety of the people.

The martial law was declared on 20 May 2014 by Army Commander-in-Chief General Prayut Chan-O-Cha, who stated that the declaration of martial law was intended to ease political conflicts and bring back peace and order to the country as soon as possible. It also aims to seek a solution to the political deadlock.

The Bank of Thailand stated that the Thai banking system and the capital market still continue as usual, after the declaration of martial law. The performance of the Thai banking system in the first quarter of 2014 remained sound while credit growth continued to slow down. Despite deterioration in loan quality, commercial banks still have high levels of provision as a buffer for economic uncertainties, as well as a solid capital position.

According to the Bank of Thailand, in the first quarter of 2014, the contraction of the Thai economy caused by the prolonged political situation, which held back consumption and investment by households and businesses, resulted in a slowdown of the banking system’s loan growth to 9.8 percent from 2013.

Meanwhile, Vice President of the Thai Chamber of Commerce Pornsilp Patcharintanakul said that the martial law would help ease the political situation, which would lead to the improvement of the economy. The stock market might be affected in the short term, but most economic sectors are unlikely to be hurt.

The Tourism Council of Thailand held a meeting to assess the situation after the announcement of martial law. It has decided to reduce the target on tourist arrivals from 29.9 million to 26.8 million in 2014.

The council suggested that the public sector support promotional campaigns for the organizing of food or street festivals in major tourism destinations, such as Bangkok, Pattaya, Phuket, Chiang Mai, and Chiang Rai. Taxes on tourism products should also be reduced. The council believes that, with measures to stimulate the tourism sector, it is expected that Thailand’s tourism will grow further in the fourth quarter of 2014.

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