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EcoEmerging// 1st quarter 2019  
22  
economic-research.bnpparibas.com  
Thailand  
Elections in sight  
The elections promised by the military regime ever since it took power in 2014 are finally slated to be held in 2019. Yet this does not  
mean that the political and social crisis has been resolved: the ruling junta intends to remain in power without providing a veritable  
solution for “national reconciliation”. From an economic perspective, short-term prospects are still upbeat. The Thai economy will  
be hit by the slowdown in China, but thanks to dynamic domestic demand, growth should approach its long-term potential this year.  
In the long term, in contrast, the outlook continues to deteriorate as the political environment holds back the economy’s growth  
potential.  
Elections at last?  
1- Forecasts  
The long-awaited elections promised by the military junta ever since  
it took power following the May 2014 coup d’état are expected to be  
held between February and May of 2019. Postponed on four  
occasions since 2015, the elections will be the first held since the  
promulgation of the new constitution in April 2017. Parliament will  
now be comprised of an upper house, the Senate, with 250  
members elected by a panel of grand electors (all jointly named by  
the King and the military authorities), and a lower house, the House  
of Representatives, whose 500 members will be elected every four  
years.  
2
017 2018e 2019e 2020e  
Real GDP growth (%)  
3.9  
4.1  
3.7  
3.7  
Inflation (CPI, year average, %)  
Gen. Gov. balance / GDP (%)  
Gen. Gov. debt / GDP (%)  
0.7  
1.1  
1.3  
1.5  
-1.8  
-2.1  
-2.3  
-2.1  
41.2  
10.8  
41.8  
8.1  
42.2  
7.3  
42.6  
6.8  
Current account balance / GDP (%)  
External debt / GDP (%)  
33.0  
32.0  
197  
31.5  
215  
31.0  
225  
Forex reserves (USD bn)  
194  
Forex reserves, in months of imports  
Exchange rate USDTHB (year end)  
8.5  
8.9  
9.0  
10.1  
32.0  
32.7  
32.4  
32.8  
Holding elections will obviously be a big step forward, but it will not  
suffice to resolve the country’s political and social crisis that has  
been festering for nearly 15 years. The ban on public meetings –  
one of the military regime’s first decisions on taking power  was  
partially eased in September to appease popular unrest and allow  
the various political parties to recruit new members and elect their  
leaders. The ban was not completely lifted until 11 December,  
leaving the political parties barely two months to organise  
themselves and launch their electoral campaigns.  
e: BNP Paribas Group Economic Research estimates and forecasts  
2- Steady growth  
GDP, %, y/y  Consumption (pp)  Investment (pp)  
Net exports (pp)  
2
1
1
0
5
0
5
0
5
The risks of a popular uprising are still high, as illustrated by the  
numerous protests that have broken out since the ban was lifted.  
Protests have intensified since the beginning of January, when the  
military threatened to postpone the elections initially scheduled for  
24 February. Officially, the military does not want the elections to  
interfere with the preparations for the king’s coronation, which is  
scheduled between 4 and 6 May. The elections might be postponed  
until after the coronation.  
-
-
10  
2
006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018  
The military does not intend to loosen its grip on  
power  
Source: National Accounts  
Looking beyond scheduling issues, the elections themselves will not  
mark a veritable return to democracy. The military has never  
implemented the “national reconciliation” that it promised after  
taking power . The ruling military junta seems to have decided to  
stay in power and is doing all it can to ensure favourable election  
results. Since taking power, the military’s ambition has been to  
reduce the influence of Thaksin Shinawatra (who is still very  
influential) and the anti-monarchists as much as possible. This is  
surely the real reason why the elections have been repeatedly  
postponed.  
2
1
The new constitution was written by the military in its own best  
interest. Regardless of the election results, the new government will  
have to comply with a “strategic plan” compiled by the current  
1
Roughly speaking, power can be divided between the political elite, the  
bureaucracy and the military  all urban dwellers close to the royal family -- who  
want to keep an exclusive hold on power, and the more rural Democrats, who  
believe that power should be exercised by elected political representatives. The  
new constitution seems to widen the gap further between the two camps, by  
institutionalising the political presence of the military and the elite.  
2
Prime minister from 2001 to 2006, overthrown by a coup d’etat and in exile  
ever since to escape corruption charges that he claims are politically motivated.  
EcoEmerging// 1st quarter 2019  
23  
economic-research.bnpparibas.com  
government and written in the constitution, which provides a  
framework for the country’s political life for the next 20 years. The  
new government will be restricted by a set of laws that reserves  
power for the military, the Senate and “independent” agents. The  
new electoral rules seem to have been designed to encourage the  
segmentation of the House of Representatives and to prevent the  
formation of a strong coalition.  
3
- Substantial current account surpluses  
Current Account balance, 4q moving average, % of GDP  
▪▪▪ Net FDI, 4q moving average, % of GDP  
1
1
1
4
2
0
8
6
4
2
0
2
4
Another measure in the new electoral regulations stipulates that an  
individual who is not a Parliamentary member, but who could be in  
the military, can apply to be prime minister, if no “natural” candidate  
emerges from among the MPs. This measure seems to be tailored  
specifically for Prayuth Chan-o-cha, the acting Prime Minister since  
the coup d’état, so that can remain in his post.  
-
-
Buoyant growth  
2
006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2017 2018  
From an economic perspective, short-term prospects are still strong  
despite the expected slowdown in 2019: GDP growth probably  
exceeded 4% in 2018, the strongest performance since 2012, and is  
likely to slow to 3.7% in 2019. Regardless of the election results, the  
new government’s economic policy will be tightly framed by the  
Source : Bank of Thailand  
Despite a persistently accommodating fiscal policy, the deficit is  
expected to remain under control. Pre-electoral spending and the  
various infrastructure projects implemented by the government will  
add to the public deficit (estimated slightly above 2% of GDP in  
2018 and 2019, up from less than 2% of GDP in 2017). The public  
debt is also expected to increase slightly, but will remain moderate  
at 42% of GDP in 2019 (up from about 40% of GDP in 2017). The  
debt profile is also favourable: less than 1% of the debt is  
denominated in foreign currency, and less than 15% is held by non-  
residents.  
“national strategy”, and thus will have little impact on growth.  
First, domestic demand will be the main growth engine. Ongoing  
labour market improvements will boost household consumption.  
Second, the Thailand 4.0strategy, which calls for a transition  
towards more value-added manufacturing industries, and the  
various infrastructure projects launched since 2016, notably in the  
Eastern Economic Corridor (EEC) in the eastern part of the country,  
will continue to fuel public and private investment. Public investment  
was already up by more than 4% on average in the first three  
quarters of 2018.  
Medium to long-term prospects continue to deteriorate, as they have  
for the past 10 years. The country is faced with numerous structural  
challenges (aging population, low level of education and a decline in  
the country’s attractiveness and FDI inflows due to the political  
crisis). Moreover, these problems are intensifying but no lasting  
solutions have been found. Assuming they are effectively  
implemented, the reforms called for in the “national strategy” and  
the “Thailand 4.0” and EEC plans should increase the country’s  
attractiveness, boost productivity and spark an upmarket shift in  
industrial supply chains. Yet the lack of political continuity is  
hampering the implementation of these reforms.  
Manufacturing exports, in contrast, which account for more than  
50% of GDP, are expected to slow. After growing rapidly in the first  
8
months of the year (by more than 10% y/y between January and  
August 2018), they have slowed sharply since September  
increasing less than 1% between September and November 2018).  
(
This slowdown will continue in 2019 as Thai exports are hit by the  
combined impact of the US-China trade war and the Chinese  
economic slowdown. China and the United States each account for  
about 12% of Thailand’s merchandise exports.  
Service exports are also exposed to the Chinese slowdown via  
tourism revenues (more than 12% of GDP in 2017). Chinese tourists  
accounted for nearly 30% of the total in first-half 2018.  
Medium-term sources of alarm  
Naturally, the decline in exports and tourism revenues combined  
with the increase in imports as part of the advancement of  
infrastructure projects will strain the current account surplus, which  
should narrow to 7% of GDP in 2019, from 8% in 2018 and more  
than 11% in 2016-2017. Even so, the current account surplus is still  
substantial and will largely offset structural capital outflows (FDI of  
Thai companies investing abroad).  
QUI SOMMES-NOUS ? Trois équipes d'économistes (économies OCDE, économies émergentes et risque pays, économie bancaire) forment la Direction des Etudes Economiques de BNP Paribas.
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