Business

Thai protests: the economic impact

Thai woman waits for business at a stall
Image caption The night market at Patpong is usually packed with tourists

As clashes between Thai forces and anti-government protesters in Bangkok continue, there are growing fears about the impact the protests are having on the Thai economy.

The protesters, called red-shirts after the colour they have adopted, converged on Bangkok in March. They want Prime Minister Abhisit Vejjajiva to resign, with many supporting former prime minister, Thaksin Shinawatra, who was ousted in a coup in 2006.

The latest round of violence has left 36 dead and some 250 injured.

The crisis has left the city a virtual no-go zone for tourists with hotels, shops and restaurants faced with a sharp drop in the number of visitors.

Some businesses in Bangkok's shopping district had to close their doors altogether when anti-government protesters occupied the area last month.

And there are now fears that the political unrest could harm Thailand's economic growth and put off foreign investors.

Fewer tourists

Tourism makes up about 6% of Thailand's economy, but accounts for 15% of the country's workforce.

The British Foreign and Commonwealth Office currently advises against all but essential travel to Bangkok, but Abta, the UK travel association, says that while British tourists are rearranging their holidays, they are not cancelling altogether.

"The majority of the country is not a problem at all," Abta says. "Places like Ko Samui and Phuket - seen as the 'real' Thailand - are not affected by this.

"Many people may have been planning on just going to Bangkok for a couple of days of their trip. What we suggest people do and what they are doing is amending their itineraries so they don't go to Bangkok now."

But while the island resorts may still be attracting the tourists, the capital certainly is not.

Following clashes last month between soldiers and protesters, hotel occupancy in Bangkok was down to 20% at a time when it is normally at 80% or 90%, government spokesman Puttipong Punnakan has said.

Shops and mall operators have not only had to deal with fewer tourists, but the red shirts' occupation of the Rachaprasong shopping district has also forced many to shut up shop.

"Shops and department stores in the red zone have now lost about 1bn baht ($31m; £21m) a day," Thanapol Tangkananan, president of the Thai Retailers' Association said after April's clashes.

Growth revisions

Thai Finance Minister Korn Chatikavanij has forecast economic growth of between 4.5% and 5% this year, but the civil unrest is threatening to reduce that figure.

After meeting with business associations, Mr Chatikavanij has said the protests could cut 0.3% off his forecast.

Analysts have said growth could be as much as 2% lower than the government estimate if the clashes continue.

Image caption Protesters have been holding rallies in Ratchaprasong shopping district

Thailand's economy relies heavily on exports and how the economy performs this year will largely depend on whether or not exporters are hit.

Richard Han, chief executive of electronic components manufacturer Hana Microelectronics, said in a recent interview that as long as the airports are open, business would be able to continue.

But he did voice longer-term concerns as to what customers would think about dealing with Thai companies in the future if the situation is not resolved.

Foreign investor fears

Meanwhile, Amata Corp, Thailand's biggest industrial land developer, is already having to deal with customer concerns.

It has revealed that some Japanese clients have delayed signing contracts because of the unrest and warned that sales might suffer.

Foreign investors have already shown some signs of withdrawing from Thailand - since violence broke out last month, foreign investors have sold $584m in Thai shares, leaving Thai stocks among the cheapest in Asia.

Investment firm Fidelity had said that should the ongoing crisis affect corporate earnings, it would reconsider its investment decisions.

"Our decisions around investing in Thailand are more driven by the underlying fundamentals of the companies," Gregor Carle, investment director at Fidelity, said.

But he went on: "If we feel that there is an escalation in events in Thailand that threatens the corporate environment, obviously we will adjust the portfolio to reflect that."

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