Could Thailand’s coup damage Asia?

Thailand’s latest military coup hardly improves the odds of solving its protracted political crisis, says Andy Mukherjee on Breakingviews. The stand-off has already sent the economy into recession: it shrank by 2.1% in the first quarter from the previous three months.

Consumers and businesses have been severely rattled. Private investment fell by an annual 7.3%; household consumption by 3%. The last coup, in 2006, meant that Thailand fell behind the rest of the region. It’s set to be a similar story this time.

The good news, however, is that the rest of Asia should barely be affected by Thai turmoil, says Capital Economics. Thailand is not an important export market for the region; it accounts for 2%-3% of emerging Asia’s foreign sales. Malaysia has the largest exposure, at 5% of exports, but intermediate goods (which are shipped on) make up most of the total.

Asia’s solid external finances also make contagion unlikely. Malaysia and Vietnam, meanwhile, tend to gain tourists from Thailand during periods of turmoil.

Longer term, foreign investors deterred by political instability and stalled reform efforts seem likely to opt for Indonesia and the Philippines instead, as these countries have been closing the competitiveness gap with Thailand in recent years.

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