Thailand Consumer Confidence Dips as Political Turmoil Hurts the Economy

Thailand’s consumer confidence plunged to its lowest level in about 12.5 years in March, highlighting the toll the prolonged political turmoil is having on Southeast Asia’s second-largest economy.

With the anti-government protests still on, the country is fast losing its allure to tourist; while its reputation as being able to withstand shocks is under scrutiny.

The consumer confidence index compiled by University of the Thai Chamber of Commerce slid from 69.9 in February to 68.8 in March. The index, which has declined for 12 consecutive months, has hit its lowest level since November 2001.

“The consumer confidence index is tied pretty closely with the political situation,” Thanavath Phonvichai, an economics professor at University of the Thai told Reuters.”The Thai economic structure is quite weak and fragile. There’s an increasing risk for the economy to expand less than 2 percent, with more possibility of flat growth or a contraction.”

The poll indicated that the readiness by consumer to buy new cars plunged to the lowest point in 27 months, while the one for new houses hit the lowest point in 105 months. Thailand is the regional export and manufacturing hub for global automakers. Sales of autos in the country fell roughly 45 percent in February from a year ago.

Tourism, which contributes 10 percent of Thai’s GDP, has taken a hit, with bookings down 7.3 percent in the quarter ended March from a year, based on Tourism Council of Thailand’s statistics. However, the industry is expected to recover after Bangkok lifted a state of emergency on the capital in mid-March.

The visitor cancellations are estimated to have slashed Thai tourism revenues by 50.8 billion baht ($1.57 billion) in the quarter, the council added. They are also expected to slash 31.9 billion baht more in the second quarter.

Thailand’s central bank expects the economy to grow by 2.7 percent, down from its earlier estimate of 4.8 percent before the anti-government protests began. This is in contrast to last year’s figure of 2.9 percent and 2012’s 6.5 percent, a reduction that was mainly due to destructive floods that battered the country.