5 - The Impact of the Red Shirt Rallies on the Thai Economy

Summary

INTRODUCTION

Early expectations for Thailand's economic performance in 2010 were cheery, as its 2009 performance coupled with upbeat business confidence around the globe in the last quarter of the same year painted a fabulous picture of the Thai economy reaching a GDP growth rate of 4.5 to 6 per cent in 2010. All major sectors — manufactures, tourism, finance, and trade — exhibited positive growth figures during the country's strong recovery from the global economic downturn. By June, however, the country appeared to be on the verge of losing all gains from the global economic turnaround, as the Red Shirt army had jeopardized livelihoods in the Ratchaprasong district — the hub of business activities in Thailand.

This essay aims to provide a realistic assessment of the impacts of Thailand's never-ending political pandemonium. The analysis of several economic indicators reveals that economic hardship in the aftermath of the Red blockade will prove transitory and limited only to a plunge in GDP growth by 1 to 2 per cent as business confidence bounced sharply back to its pre-crackdown level and as the manufacturing sector — a key driver of Thailand's economy — continued to enjoy the global economic recovery and a surge in export demand from emerging Asia. However, closer examination at the sectoral level reveals that Thailand's generally resilient economic condition conceals the excruciating pain felt by the labour force. The Red uproar pushed millions of workers, especially those employed in the service and the wholesale and retail trade sectors, into unemployment. Several policy responses to shield the economy against weakening sentiment and the physical damage done during the protests are proposed. These measures include tax relief, provision of liquidity to businesses in the erstwhile no-go zone, direct subsidies for those affected by the crackdown, and long-term economic policies to bridge Thailand's income gap.

The organization of this essay is as follows. The second section reviews developments in the Thai economy leading up to the 2010 crackdown. The third section assesses the economic impacts of the Red strife on the economy. The fourth section concludes and discusses several policy measures intended to revive economic sentiment and shield the most vulnerable against the knock-on effects of the country's political conflict.

ECONOMIC OUTLOOK LEADING UP TO THE 2010 CRACKDOWN

The Thai economy was hit hard by the global economic downturn and domestic political turbulence in 2009.