Investors in Thailand undeterred by political unrest: Report

Tuesday, November 3, 2020 - 14:19
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POLITICAL unrest in Thailand is unlikely to have an immediate impact on the economy, despite earlier pressure from the Covid-19 outbreak, watchers have said.

That’s as foreign direct investment (FDI) remains on track with a “healthy pipeline” in the works, according to a note on Tuesday (Nov 3) from DBS economist Radhika Rao and currency strategist Philip Wee.

“Inbound tourism, which is usually hurt by domestic unrest or protests, is already under pressure due to the pandemic,” the analysts added. “While ongoing political protests compound the challenging growth environment due to the coronavirus, the fallout might not be long-lasting, barring an escalation in tensions.”

Even though political challenges since 2012 have hurt business and consumer confidence, the report noted that there were also other factors affecting FDI fluctuations - such as a global supply chain shift that benefited other Asean markets, especially Vietnam.

Still, “the trend does not suggest that FDI commitments have been deterred”, it said, citing growth drivers such as Thailand’s manufacturing capabilities. The DBS team also highlighted investment incentives, such as a five-year corporate tax cut of 50 per cent announced last year, which are expected to maintain the economy’s competitiveness against its regional peers.

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Rather than a large material impact on the economy, the main drawback from political tensions in Thailand “has been a slower and gradual reform process, due to a fluidity in the leadership transition”, the report concluded. But it also noted that a fiscal spending package is already under way, while disbursement of FY2021 Budget funds is unlikely to face the delay of the year prior.

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