Thai martial law seen having limited impact here

[SINGAPORE] Even as army tanks and gun-wielding soldiers patrol the streets of Bangkok, observers here say Thailand's martial law - declared by the army early yesterday morning - will have a contained impact on the Singapore economy, provided the situation does not escalate further.

After months of deadly street protests, Thailand's army chief, General Prayuth Chan-ocha, imposed martial law nationwide yesterday as a means to restore order, while insisting the move was "not a coup".

Speaking at a Ministry of Trade and Industry (MTI) press conference yesterday for the release of Singapore's Q1 GDP figures, MTI permanent secretary Ow Foong Pheng said that so far, the protests in Thailand have only had a "minimal" impact on Singapore.

She said that supply chains and exports to Thailand haven't been affected, and noted that electronics imports from Thailand went up, in fact, by 14 per cent in the first three months of this year. She added that inward tourism numbers from the country continue to be strong.

"Where it's had an impact is really in terms of our airports. As an air hub, I think the reduction in terms of air travel into Thailand has been affected," explained Ms Ow, who noted that travel between Singapore and Thailand fell by 18 per cent over the first quarter.

Added Ms Ow: "We will continue to watch the situation and see how it goes, but so far (the impact has been) minimal."

Economists The Business Times spoke to are adopting the same watchful wait-and-see stance. Unless tensions in Thailand escalate or turn violent, they say the impact on the broader Singapore economy "will not be very significant", and will continue to be contained.

Certainly, as Singapore acts as an air transport gateway for tourists travelling to Thailand, economists agree that the Republic's airport traffic "will see a fair bit of impact" going forward.

But the flip side of that, noted DBS and CIMB economists, is the potential for the country to capture demand from travellers who may divert their plans away from Thailand, and into Singapore.

According to Barclays economist Leong Wai Ho, a similar positive spill-over effect could happen on the manufacturing front. "Singapore could benefit from having more manufacturing activity diverted from companies in Thailand. Other companies worried about supply chain security may transfer critical component production to Singapore," he said.

CIMB economist Song Seng Wun agreed: "With the military around to prevent further outbreaks of violence, we might (start to see) some much-needed calm ... Not that soldiers with guns is going to heighten consumer confidence - but at least you don't get a total breakdown in law and order (which would) undermine investor confidence (and affect) supply chains."

As for trade, based on 2013 data, the Thai market accounted for 3.7 per cent of Singapore's total exports, but was less significant in terms of imports for Singapore at 2.5 per cent.

Said OCBC economist Selena Ling: "This suggests that in terms of any temporary domestic disruptions to the Thai economy, whether due to martial law or prolonged political uncertainty, the impact should be relatively muted from the trade angle."