Bangkok Protests Take Toll on Thai Economy

January 28, 2014 Updated: April 24, 2016

Bangkok Protests Take Toll on Thai Economy

Anti-government protests in the city of Bangkok have drummed up a great deal of attention in recent weeks, but most of the impact might be seen on the country’s economic rather than its government.  Major drops in tourism have been seen as a result of the demonstrations in Bangkok, and a recent survey by the University of the Thai Chamber of Commerce suggests that the protests might cost as much as 1 billion baht (more than $30 million) per day.  The demonstrations, which have grown in intensity in recent weeks have aimed to raise support for campaigns to “shut down” the capital city and force Prime Minister Yingluck Shinawatra to resign her post.  Additionally, protesters are calling for political reforms in anticipation of the national elections scheduled to take place next month. 

Effects on Tourism

But the unintended consequences of these activities could extend far beyond the political realm.  Thailand remains one of the most often-visited tourist destinations in Asia, with regular streams of foreign visitors entering the country from all regions of the globe.  Threats of violence, however, have led 46 nations to issue travel warnings in Thailand, however, and industry think-tanks have reported that hotel reservations have dropped by nearly 25%.  “The total impact on the Thai economic remains unclear at this early stage,” said John Gordon at NordFX Company.  “But we have already seen downside revisions in annual growth projections as a result of these demonstrations.”  This is hardly a surprise given the fact that tourism makes up such a significant portion of the Thai economy.  And this creates the potential for long-term difficulties given the fact that there is little reason to believe that we will see a resolution any time soon. 

Stock Markets and the Element of Uncertainty

More immediately, the central stock benchmarks in Thailand have come under pressure as investors look to avoid the element of uncertainty at a time when central banks around the world have already started to reduce (or suggest possible reductions) in economic stimulus packages.  The clearest example of this can be seen in the US, where the Federal Reserve announced last month that monthly quantitative easing purchases would be cut by $10 billion per month.  For investors concerned about demand for exports in emerging markets, this lights warning flares, as there is reduced incentive to take on the added risks associated with political uncertainties.  

Looking ahead, the potential for volatility in Thai stocks remains elevated.  This will likely continue until we see some attempts at resolution at the government level.  It will also be important to watch for changes in growth forecasts that result from the shutdown and the expected drops in tourism revenues.  Thailand, perhaps more than any other country in emerging Asia, is heavily dependent on revenues in these areas.  So the potential for drastic declines remains elevated as long as these political concerns persist.