A fatal blow for Thai economy?

A renewed slump in tourism due to terrorist-related activity would be a huge setback for Thailand.

Over 20 people died in a bomb blast at a shrine in the centre of Bangkok on Monday. At the time of writing, it was unclear who was responsible. In recent years Thailand has been split between supporters of former Prime Minister Thaksin Shinawatra and his opponents. Some have blamed Islamic separatists from the south of the country. The Thai baht has slid to a six-year trough against the dollar and the stockmarket is at a low for the year.

What the commentators said

A renewed slump in tourism "would be a huge setback" for Thailand, said Andy Mukherjee on breakingviews.com it's "the last source of support" for an ailing economy. GDP growth slipped to a historically lacklustre 2.8% annual pace in the second quarter. Just about everything has gone wrong, as Nyshka Chandran noted on cnbc.com.

A nasty drought has hit rural areas and affected rice production. Forty percent of the population is involved with agriculture, and this segment is spending less as a result. On the national level, high consumer debts are also hampering household spending.

Export growth has faltered amid lacklustre global growth and dwindling competitiveness. Wages have increased faster than productivity in recent years. A rapidly decreasing current-account surplus may encourage foreign capital to leave Thailand. Given this lacklustre demand, it's no wonder inflation has been dwindling, said Mukherjee. And the central bank has little scope to prevent the slide, as interest rates are already very low at 1.5%. Thailand could slip "into a deflationary morass".

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