Thai central bank warns further delay in forming govt could damage investment, confidence
The central bank warned on Tuesday that delaying the next government’s formation beyond the end of this month could erode investors’ confidence and pose a significant risk to the Thai economy.
Chayawadee Chai-anant, assistant governor of the Bank of Thailand, said political uncertainty was one of three core risk factors for country’s economic outlook. The other two risk factors are global economic uncertainty and high living costs.
Chayawadee said a prolonged delay in forming the government could affect disbursement of budget for state agencies, with potentially severe consequences for the economy.
“This will depend on how much of a delay there is. Too long, and it could affect investors’ confidence,” she added.
The eight-party coalition led by Move Forward and Pheu Thai have so far failed to form a government following May's election due mainly to opposition from senators. Some coalition leaders have suggested delaying the government’s formation for another 10 months, by which time the current Senate’s term will have expired.
On the economic outlook, Chayawadee noted that Thai exports fell 5.9% in June but said the BOT expected the situation to improve late this year.
She attributed the drop in exports to the global economic slowdown and China’s sluggish economic recovery.
Chayawadee said the economy was on a rising trend thanks to the continual recovery in the tourism sector. In June alone, 2.24 million tourists visited Thailand, while travel bookings and accommodation searches indicated that foreign tourist numbers would keep rising for the rest of this year.
Chayawadee said political uncertainty was also to blame for the baht weakening against other regional currencies in June.
The baht also fell against the US dollar.
However, the Thai currency rose in July on expectations of a policy rate hike by the US Federal Reserve.
Chayawadee said Thailand’s economic outlook in the second quarter slightly improved from the first quarter and the uptrend would continue in July due to improvements in the tourism and service sectors.
