Thailand Cuts 2014 Growth Outlook on Political Risk

by on January 16, 2014 4:50 pm BST

Thailand was cut its 2014 growth forecast for the second time in less than a month as ongoing political protests rage on. According to the Finance Ministry, gross domestic product may grow 3.1 percent, while the previous view on expansion was four percent that was reduced from 5.1 percent on December 26. Goldman Sachs lowered their forecasted from 4.2 percent to 3.6 percent in 2014.

Thailand began protesting over an amnesty bill being introduced by Prime MInister Yingluck Shinawatra for her brother, former Prime Minister Thaksin Shinawatra who was ousted in the coup of 2006. Apparently, it runs in the family.

The leader of the Democrat Party and of the protests, Suthep Thaugsuban, said that the protests will continue until the current prime minister steps down and an un-elected council is implemented in her place. Protests have been non-violent of late, but the intensity grew when the current government tried to postpone the schedule elections on February 2.

“Heightened political tensions have marred investor confidence,” said Moody’s Analytics Inc. Investors stampeded out of Thai equities and debt instruments as the political risk mounted. The Thai baht sank as a result. An interest rate cut is expected at the next Bank of Thailand decision meeting on January 22.

Finance Minister Kittiratt Na-Ranong said that the continuous turmoil is creating a publicly unstable view of Thailand, and the economy will suffer the longer a new government setup is delayed.

The baht has recently strengthened against the dollar after hitting 33.07 baht per dollar. USDTHB is currently trading at 32.68.