beyondbrics

The Thai economy grew by a whopping 12 per cent in the first quarter, officials announced today. But investors barely batted an eyelid at the biggest increase for 15 years. They were far more interested in what the government had to say about the impact of the political crisis on the current quarter and beyond. And here the news was much less good: the planning agency said that because of the two-month long turmoil it was leaving the 2010 annual forecast unchanged, instead of raising it by 1.5 percentage points.

Weighed down by the news, Thai shares closed down 2.8 per cent, on the stock market’s first day following last week’s two-day enforced holiday. But it could be worse – Thailand remains Asia’s top performing stock market for the year so far.

Warut Siwasariyanon, head of research at Finansia Syrus Securities in Bangkok, told Reuters: “Investors may be temporarily relieved that a semblance of normalcy has returned, but the political risk remains high and
investors will likely be cautious.”

The authorities yesterday extended a curfew imposed on May 19 for another seven days – an indication of the continuing tensions in Bengkok and some other Thai cities.

But despite the apparent political stalemate and the concerns about the economic impact of the crisis, Moody’s, the credit rating agency, remains optimistic. In a note today, it said it would maintain its negative outlook on the country – rating it Baa1- because of the political crisis, which reached a pitch last week when over 60 people were killed in violent clashes between the military and anti-government protestors, but would do nothing more as it said Thailand’s core credit fundamentals looked fine.

It said that the political conflict would drag the economy down in Q2 and Q3, but that it does not see capital flight as a major problem. It said of the export-dependent economy:

On the other hand, if the euro-zone crisis does not halt the global economic recovery, Thailand’s export competitiveness should provide enough buoyancy to the economy to keep real GDP growth in positive territory this year, perhaps around 4 percent.

Other analysts highlight a healthy manufacturing sector, relatively untouched by the riots, and point to a curb on consumption and imports that could boost Thailand’s trade surplus and could help to keep the baht buoyant.

Speaking in Japan last week, Thailand’s finance minister Korn Chatikavanij said GDP would take a hit from riots, but addded the country’s quick economic recovery and government revenues would help to keep figures up this year.

In Bangkok where many businesses have been affected by weeks of protests, particularly on the battleground in Bangkok’s financial district, the Nation newspaper reports financial remedies are on the cards. Last week the deputy finance minister announced that Baht 10bn would be put aside for loans to small businesses that have been affected by rioting, said the paper.

Related reading:
Bangkok quiet but tensions persist, FT bb
Thai exports drive strong growth, FT

keep thinking it’s another grenade blast or gunshot.”
(Writing by Raju Gopalakrishnan; Editing by Paul Tait)