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.

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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".

Andrew Van Sickle

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.