Thai economy struggles post-election, foreign investment declines

Thailand’s economy continues to struggle despite the first General Election since 2019, which was anticipated to stimulate growth and attract foreign investors. Instead, the nation has seen its benchmark stock index decline for the fifth quarter consecutively, foreign investment is waning, and the baht is showing the second-worst performance amongst Asian currencies.

According to Narongsak Plodmechai, CEO of SCB Asset Management Co, a significant rally in Thai stocks would require a clear rebound in corporate earnings, a prospect that seems unlikely due to the stagnant economy. As a result, Thailand is becoming Southeast Asia’s least appealing market. Analysts have reduced corporate earnings estimations to a two-year low, while the highly anticipated fiscal stimulus has been postponed.

Data compiled by Bloomberg reveals that foreign funds sold a net US$5.5 billion of Thai stocks in 2023, marking the highest selling since 2020. Jessada Sookdhis, CEO of Finnomena Co, stated that the charm of Thai stocks has waned even amongst domestic investors, and the outflows of foreign funds will likely further weaken investor sentiment.

Corporate earnings in Thailand saw an 11% drop last year, primarily due to weak consumer demand resulting from high household debt. The poor economic climate is reflected in the performance of Thai Credit Bank Pcl, which fell 10% from its IPO price last month, and Central Retail Corp and Bangkok Bank, which have slid 12% and 11% respectively, this year.

Prime Minister Srettha Thavisin has advocated for a rate cut as manufacturing production fell for the 16th consecutive month. However, Bank of Thailand (BoT) Governor Sethaput Suthiwartnarueput has maintained the policy rate, stating that a rate cut is not a cure-all for the economy’s structural issues.

Investors appeared to agree with the central bank’s stance, with global funds selling US$612.5 million worth of bonds in March, indicating a lack of expectation for a reduction from the 2.5% rate. Furthermore, analysts from Goldman Sachs Group Inc., suggested that the baht has a significant potential to underperform against its peers.

Thai economy

The ongoing political uncertainty is another concern, with the Election Commission (EC) filing a petition in March to disband the nation’s largest opposition party for allegedly breaching a charter over efforts to amend the royal defamation law. This development could potentially prompt street protests, further disrupting the economy, reported Bangkok Post.

Despite these challenges, the government anticipates annual growth of 2.2% to 3.2% this year. However, Tanawat Ruenbanterng, an analyst at Tisco Securities Co, stated that Thailand’s underperformance compared to its peers is primarily due to the weak short-term macroeconomic growth outlook and disappointment over the lack of government stimulus measures.