Anti-government marchers have been gathering across Thailand in defiance of a state of emergency, and their list of demands now stretches to include reining in the powerful monarchy. Prime Minister Prayuth Chan-Ocha has indicated he wants to talk. He could do with listening, too.
Discontent has simmered since a March 2019 election, but gathered steam late in the year with the disqualification of opposition leader Thanathorn Juangroongruangkit and the subsequent dissolution of his party. With few concessions and despite multiple arrests, restlessness has intensified and student-led protests have broadened. Former junta leader Prayuth has few useful options in his normal toolkit. A glance at the ailing $500 billion-plus economy provides one good reason for officials to show flexibility.
Thailand was worryingly sluggish even before the pain inflicted by 2020, thanks to unimpressive productivity growth, the Sino-U.S. trade war, severe drought and its stubbornly strong currency. The coronavirus has hit tourism especially hard. The country has since done better than most neighbors in containing the pandemic, with the exception of Vietnam, but the aftermath has been painful. Now, the prospect of prolonged unrest risks spooking businesses and consumers, whose confidence has only just begun to recover. Tourists, who contribute roughly 20% of gross domestic product, may stay away even if restrictions slowly begin to ease.
In the latest escalation, the government ordered emergency measures last week that ban gatherings of five or more people and news considered detrimental to national security, and used water cannon to disperse the crowd. Nonetheless, tens of thousands of people came together again at the weekend. Now, authorities are threatening to censor troublesome media, too.
Protest is hardly new. The Southeast Asian country has seen about a dozen coups and many unsuccessful attempts since the transition to constitutional monarchy in 1932. The economy does recover, but the bounce has grown less pronounced as underlying, untended structural woes from labor to education and infrastructure linger. Analysts at Capital Economics point out that private investment, excluding housing, has yet to reach levels seen before the 2014 coup that first put Prayuth at the helm.
Equity investors are certainly not sticking around. The benchmark SET index has declined by almost a quarter this year, making it one of the worst performers in the region, with consumer stocks particularly dented. Foreigners have already pulled, net, more than $9 billion from domestic equities in 2020 — exceeding 2018's record annual outflow. Though admittedly easing some concerns about Thai competitiveness, the baht currency has gone from outperformer to one of Asia's weakest in 2020.
The trouble is that it's difficult to envision how the government's next steps can help either the economy or future stability. During his time in office, Prayuth has shown no hint of pliability or instinct for radical reform, even when he had untrammeled power as junta leader. Equally, his government appears unsure how to deal with a leaderless popular movement that will be hard to silence in the age of social media. One credible option is returning to charter reform, given one of the protesters' demands is rewriting a constitution drafted by a military-appointed panel after 2014. So far, that effort has stalled as lawmakers instead want to vet plans submitted earlier. At best, it would buy time. The worst case would be lethal violence that has periodically suppressed protests over the decades.
Even harder to see is how the monarchy would make concessions to those protesters who want to see a more democratic version of the institution, with the king, who spends most of his time in Germany, separating his wealth from the crown's assets and relinquishing control over some army units. They also want to see laws that punish insulting the monarch scrapped. Yet the issue is divisive, even among demonstrators.
Without efforts to foster a truce, let alone tackle deep divisions within Thai society, instability will continue. That's a worryingly open-ended distraction for a government expecting to see the economy post its worst drop on record this year.
Growth — and investors — won't return in earnest until that changes.
Disclaimer: This article first appeared on Bloomberg Opinion, and is published by special syndication arrangement