Further delay in hearing case against PM affecting growth: experts

Following the Constitutional Court’s announcement that it is moving the next hearing in the case against PM Srettha Thavisin to July 24, the private sector is expressing concerns that the delay could cause political instability.

The case was brought by 40 senators who filed a petition with the Senate President, alleging that Srettha, who either knew or should have known that Pichit Chuenban was disqualified or prohibited under the Constitution due to a previous 6-month imprisonment sentence by the Supreme Court for contempt of court, nonetheless submitted Pichit’s name for royal appointment as Minister attached to the Prime Minister’s Office.

Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), stated that the lack of a Constitutional Court ruling on the Prime Minister’s case is creating an atmosphere of uncertainty. He said that a prompt decision would clarify the situation, enabling businesses to plan accordingly. The prolonged ambiguity, however, leaves room for both positive and negative outcomes, thus prolonging the uncertainty and affecting business operations.

Investors, both domestic and international, view this delay as a period of uncertainty, leading to postponed investment decisions and impacting the overall economy.

“Investors prefer clarity over uncertainty,” Kriengkrai said. “Such a situation slows down everything, hindering economic recovery or the initiation of new economic activities.”

Sanan Angubolkul, chairman of the Thai Chamber of Commerce and Board of Trade of Thailand, agreed, saying that recent political uncertainty has significantly affected investor confidence, as reflected in the falling Thai stock market and capital outflows. A clear resolution would positively impact new investment decisions.
The private sector is concerned that prolonged political uncertainty will exacerbate economic woes. During the third quarter of this year, the economy is expected to benefit from government spending, the agricultural harvest season, and increased tourist arrivals.

Paiboon Nalinthrangkurn, Deputy Managing Director of Tisco Financial Group, agreed that the protracted decision on the Prime Minister’s case is causing investor concern, impacting the sentiment in the Thai stock market. Despite this, he believes that a change in Prime Minister is unlikely to deter investors completely, as it would not entail a government change, provided the government continues to push forward its economic policies.

The economic recovery projections for this year are 2.5-2.6%, and for next year, 3%. If the economy improves, investor confidence will return, leading to a gradual recovery in direct investments and the stock market.

“The market is watching to see if government measures will indeed restructure the Thai economy as promised,” Paiboon added.

Supavud Saicheua, chairman of the National Economic and Social Development Council (NESDC), confirmed that the ongoing political uncertainty affects investor confidence and delays economic recovery. However, he anticipates that the Federal Reserve might cut interest rates once this year during the US presidential election period, which could prevent a recession.

If former President Trump wins the election, global economic risks might increase, impacting Thai long-term interest rates and raising government and private sector costs. This scenario would also affect Thailand’s economic outlook for the second half of this year and the next.

Pipat Luengnaruemitchai, managing director and chief economist at Kiatnakin Phatra Securities, pointed out that economic recovery in the latter half of this year is under pressure due to prolonged political uncertainty, which affects government policy implementation and investment sentiment in the Thai stock market.

Despite expectations of increased government spending and Federal Reserve rate cuts supporting the baht, economic conditions and corporate profits, the Thai economy and stock market remain vulnerable to uncertainties from the upcoming US presidential election.

Thanavath Phonvichai, president of the University of the Thai Chamber of Commerce and chief advisor to the Centre for Economic and Business Forecasting, reported that the Consumer Confidence Index for June 2024 dropped to 58.9 from 60.5 in May, marking the fourth consecutive month of decline and the lowest level in nine months since October 2023.

The overall confidence in the Thai economy, employment opportunities, and future income has decreased for four consecutive months. The main reasons are rising living costs, shrinking purchasing power due to high household debt, and political instability, particularly concerns over the Constitutional Court’s pending ruling on Srettha, which could impact government economic policies such as the digital wallet scheme and minimum wage adjustments.