BANGKOK – Thailand has filled up international news headlines over the past few days with the military finally staging a long expected coup and seizing control of the government. While many Western pundits and politicians have chided the military for overthrowing a democracy, it’s questionable if the country could have moved forward without an intervention.
Indeed, now that the dust is settling on the protests and focus is shifting back towards stability and the economy, the extent of the damage done by the protests is just now becoming clear. Thailand’s economy may have been significantly weakened by the instability and if the military can’t restore order soon, Thailand may slip even further.
Thailand’s Economy Showing Weakness
Thailand was once among South East Asia’s shining stars. After Indonesia, Thailand is the region’s second largest economy. Thailand’s economy is heavily dependent on the international community. About a third of the economy consists of manufacturing, which in turn relies on foreign investments. Now, foreign investors could chose to take their money elsewhere.
Now, months of protest have dulled some of the luster. Private investments have shrunk by as much as 4.7% while consumer consumption has declined by .8%. Retail sales make up about 15 percent of the economy, so any decline there will be felt by the rest of the country.
The economy also contracted by 2.1 percent in the first quarter when compared with the fourth quarter of 2013. Indeed the threat to the economy may have been one of the key pressures that finally forced the government to act.
With other South East Asian nations emerging at a rapid rate, those countries that fall behind risk staying behind. Asia is undergoing a dramatic period of growth, and much of that growth is being fueled by the inter-nation competition between various South East Asian stats.
Tourism is Taking a Big Hit
The military already lifted curfew restrictions, fearing the impact of such restrictions on tourism. Thailand relies on tourism in order to inject precious foreign capital into the economy. Tourism accounts for an astounding 20 percent of economic activity in Thailand. The sector also creates an estimated 2.5 million jobs.
Since the start of the year, tourism bookings have declined by 21%. The coup itself could cause an even steeper decline, especially in the short term. The recent curfew was causing restaurants to lose as much as 50 percent of their business.
Military Led Government Faces Tough Road Ahead
Thailand has seen months of protests in which the capital city of Bangkok and other major urban areas
were brought to a halt. While the politics is complicated, much of the tension rests on the growing divide between the urban middle and upper classes, and poorer rural farmers.
Former Prime Minister Yingluck relied on support from rural areas and bought it with generous government subsidy and assistance programs. The middle and upper urban classes, however, have long despised the overly generous subsidizes, with many believing that they were wasteful and many more recognizing that it was just an attempt to buy votes.
Now the military led government may be looking to restore democracy and to balance the growing tensions within Thailand. The answer for the military, however, may come down to figuring out how to keep the majority of rural voters from “oppressing” the minority of middle class urban voters, a tricky balancing act to say the least.
Thailand’s Constitution has been torn up yet again. Over the last century, Thailand has suspended its constitution over a dozen times. Now, the military-led government is asking the international community for time to fix the political system and to then restore democracy. Given the number of times the military has handed power back to the people and the fact that the King is still seen as the “final say” on all matters, it is highly unlikely that the military will try to keep power.