Bank of Thailand’s outgoing governor, amid a widespread purge of the economic cabinet including the Deputy Prime Minister and Finance Minister, stated that the economic outlook may be the worst in the region after quarterly performance at a decades’ low. Stocks are tied with Indonesia’s poorest showing this year, down 22% in USD terms. The baht after a long period of slight appreciation lags all neighbors with a 4% drop against the weak greenback despite a 6% bounce in Q2. Foreign investors have dumped more than USD 7 billion in shares, although they tentatively returned to the local bond market in June and July. At mid-year after selling USD 3.5 billion in local bonds, foreigners held 9% of the market, down sharply from 20% at end-2019.

The economy contracted 12.2% in Q2, the worst performance since the height of the Asian financial crisis. The Covid lockdown in March included a ban on incoming flights from overseas, since partially lifted for business and official travel, but reducing overall exports by nearly 30%. Accounting for nearly 20% of the economy, tourism receipts were zero for the quarter while goods exports shrank in line with global trade. For the year, the economy is likely to contract 8% as international tourists remain banned.

Former army junta chief, now Prime Minister Prayuth reshuffled the economic team as he unveiled the USD 60 billion in announced domestic demand stimulus, including cash handouts to the poor, so far with glacial implementation. Over one-third of corporate borrowers, more than 12.5 million accounts worth some USD 214 billion, applied for low-cost loans under the relief program but only about 1.5% was distributed to date, according to a local securities firm.

With economic stagnation spiking unemployment for already disaffected youth in particular, anti-government protests are growing. Student led peaceful pro-democracy demonstrators now include an age diverse crowd calling for poor and middle-class sensitive policies and a re-write of the 2017 constitution drawn up by the military-led government. In addition to drawing larger, more diverse crowds, they demand taboo discussion about the role of the monarchy.

Already with a long history of protests and military coups, the current tumult during the global pandemic will quash waning foreign investor interest. The ailing export-dependent economy is already experiencing deflation, years of military regime infrastructure project spending blew the public debt toward 50% of GDP, and hype over a next generation smart economic model is empty rhetoric for angry jobless youth.

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