Thailand Economy: GDP Suffering from a Drop in Tourism due to Political Violence
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, 15 Apr. Tourism makes up 6.7% of Thailand’s economy and 7% of its work force. The recent political violence and unrest is scaring off tourists, putting two million jobs at risk, and exacerbating an already-dark economic future.
The current riots and clashes are the most intense in a three-year conflict between supporters of expelled populist leader Thaksin Shinawatra and military-led conservative politicians.
Apichart Sankary, president of the Association of Thai Travel Agents
, said “Layoffs are inevitable. We may lose up to 200,000 people this year if the situation is not resolved.”
“We still have some tourism but the levels just aren’t what they used to be,” remarked Amporn Sangrawee, manager of a beach resort
in Phuket.
“Some tourists don’t care but many are cancelling their bookings. Just look at the beach.”
The World Bank said that Thailand will contract 2.7 per cent this year – down from growth of 2.6 per cent last year.
Thailand began to economically suffer from this political strife as far back as 2005, well before the global financial crisis started. From 2005 to 2007, economic growth sank to below 5%.
Much of this decrease in GDP can be attributed to fears of political instability and lack of consumer confidence. Mega infrastructure projects and foreign direct investment (FDI) were put on hold or cancelled, leaving tourism and exports as the main economic forces.
This sub-5% growth can be contrasted with the period between 2002 and 2004 after Thailand had emerged from the Asian Financial Crisis stronger than ever, with some of the highest GDP growth rates in the region, above 6%.
Then, a coup in September 2006 put a major damper on investment in Thailand. The country was used to pro-investment legislation and free enterprise, but the new military regime instituted capital controls, FDI restrictions, and other new corporate laws and regulations.
And with the economic crisis in full swing, the last thing Thailand needed was more troubles to ruin its tourism trade –its last pillar of stability.
“The tourism industry reaches far and wide into the Thai economy. It affects the airlines, hotels, resorts and other large firms, but possibly more damaging is the hundreds of thousands of street vendors, tuk-tuk and taxi drivers, service personnel, and others individuals that lose out,” said Vladimir Gonzales, EconomyWatch correspondent.
Most of the violence is taking place in Bangkok, where most tourists visit, at least for a few days, on their way to beach resorts or hill towns. This week two people have been killed and more than 100 injured.
The current prime minister, Abhisit Vejjajiva has been under intense pressure from opponents to resign and to dissolve parliament. His opponent, ousted Thaksin Shinawatra is urging protesters to refrain from violence. This week they blocked intersections with stolen buses and burning tires, but kept the violence in full-swing.
An army of protesters had been camping out at the capital’s main government complex, strapped with crude weapons such as rocks, sticks, and Molotov cocktails, ready to fight.
“We’re going to stay here indefinitely. This is our headquarters now,” said one of the three protest leaders, Jatuporn Phromphan.
But then on 14 April, they surrendered and peacefully left, under overwhelming military opposition.
In late 2008, Bangkok’s airports were shut down amid political struggles, leaving thousands of tourists stranded. These airport closures were widely reported worldwide, resulting in Thailand suffering considerably from a lack of inbound visitors. Airports of Thailand lost a combined sum of US $48 million from the closures and global economic woes.
These new riots have only further hurt the Kingdom’s image, and any recovery made since December will now be lost.
Hector Sim, EconomyWatch.com
