Overhang expected from suspension

Bangkok Post

01-07-2025

The Constitutional Court is expected to take 1-3 months to hand down the final verdict on the fate of Prime Minister Paetongtarn Shinawatra after the court suspended her from the post over a leaked recording of a phone call with former Cambodian leader Hun Sen.
Most analysts anticipated a suspension during the investigation into a Senate petition accusing the premier of breaching ethical standards in violation of the constitution.
"We expect the court to take 1-3 months, handing down a verdict possibly by September," said Kasem Prunratanamala, head of research at China-based CGS International Securities Group.
If she is found guilty, she is likely to be banned from politics for 10 years. However, the parliament can still vote in a new prime minister from the available candidates, including Chaikasem Nitisiri from the ruling Pheu Thai Party, whom CGS believes could be the new premier, he said.
The political overhang will continue to pressure the Stock Exchange of Thailand (SET) index, which has fallen by 23% this year, making it the worst performing market in the world year-to-date.
"We believe investors have priced in various concerns, including the US's reciprocal tariffs, domestic political turmoil and a weak domestic economy," said Mr Kasem.
"Protesters plan to rally again, but have yet to fix a date. We believe street rallies will once again disrupt businesses as consumers stay home for fear of violence, which could open the door for the military to intervene."
Given domestic political uncertainties, he said Thailand may not have much bargaining power with the US regarding planned import tariffs of 36%.
"The finance minister expects the tariff to be reduced to 10%, which we believe is too optimistic," said Mr Kasem.
Nuttawut Wongyaowarak, head of research at Globlex Securities, said investors took heart from Tuesday's court ruling as it could prevent political protests from intensifying.
"If the court did not accept the petition, protests against the prime minister were likely to escalate. Investors and the market do not like political turbulence," he said.
Amonthep Chawla, chief economist at CIMB Thai Bank, said following the premier's suspension, political uncertainty weighs on Thailand's economic outlook.
Both domestic and foreign investors are becoming increasingly hesitant, with many delaying or reconsidering investment decisions.
This caution is especially pronounced in sectors reliant on government spending, such as construction.
"The private sector is likely to adopt a wait-and-see approach, particularly for projects tied to public budgets," he said.
However, if the government can maintain political stability and ensure continuity in policy direction, the erosion of investor confidence could be contained, said Mr Amonthep, though he warned of tensions between the coalition parties.
"Should coalition parties face pressure to reassess their alignment or withdraw support, the situation could escalate towards a House dissolution," he said.
Mr Amonthep said disbursement of the current fiscal budget and planned stimulus budget is unlikely to be disrupted or delayed, as the government retains full authority and is not operating in a caretaker capacity.
Still, a political collapse and House dissolution could delay the approval process for the fiscal 2026 budget, posing a risk to the economy from the fourth quarter of this year through the second quarter of next year, he said.
TRADE TALK UNAFFECTED
Sompop Manarungsan, president of Panyapiwat Institute of Management and an economic analyst, said he believes the suspension order is unlikely to have a significant impact on the Thai delegation to the US for tariff negotiations.
He said the US is unlikely to focus on individual figures, but rather the entire Thai political system and whether it is mature and established.
If Deputy Prime Minister Phumtham Wechayachai were to step in as acting prime minister, Mr Sompop said it would likely make the transition period smoother, particularly given the escalating domestic tensions such as the protests that occurred last Saturday.
However, if the government is unable to carry on, then parliament should be dissolved and a new election held in order to preserve the system, he said.
"I believe US officials understand Thailand's political model and that this situation has not yet reached a dead end," said Mr Sompop.
"The suspension is unlikely to pose a limitation on the Thai delegation in tariff negotiations."
CONFIDENCE SHAKEN
Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said the premier's suspension would disrupt operations considerably and likely affect decision-making on important issues, making economic outlook more challenging.
Thienprasit Chaiyapatranun, president of the Thai Hotels Association, said the court ruling reflects the instability of Thai politics, which can weaken investor sentiment.
He said the administration should continue with an acting prime minister and new cabinet in place.
"We should follow the situation over the next few months after the opening session of parliament on July 3," said Mr Thienprasit.
Sanga Ruangwattanakul, president of the Khao San Road Business Association, said an acting premier and cabinet led by the Pheu Thai Party should continue working to solve the economic and tourism crises.
Stimulus measures should be implemented as planned, as tourism operators must cope with tepid purchasing power and sluggish foreign arrivals, he said.
During the low season this year, Khao San Road businesses anticipate 30% fewer tourists year-on-year, said Mr Sanga.
He said it is difficult to predict whether protests against Ms Paetongtarn will be prolonged, as the acting cabinet is still led by her political party.
Nuttanai Anuntarumporn, chief executive of Interlink Telecom Plc, said government fiscal 2026 disbursement could slow in terms of new project launches, as a new cabinet may not maintain current policies.
Meanwhile, uncertainty surrounding US tariffs and domestic political stability is likely to delay both consumer and business spending, he said.
For Interlink Telecom, its projects under independent agencies, such as the 5.4-billion-baht rural internet rollout, remain unaffected.
TOO MUCH POLITICS
With Ms Paetongtarn's political future hanging by a thread, ministers may not address all their full portfolio as they focus on political issues, including how to gain trust from people in the next election, said Tanit Sorat, vice-chairman of the Employers' Confederation of Thai Trade and Industry.
Some ministers may be considering how to garner votes in the next general election if the court's verdict caves in the government, he said.
"My question is who will fully work under these conditions?" said Mr Tanit.
The political turbulence comes as Thailand needs a capable leader and a strong team of ministers to survive economic challenges that threaten to deal a blow to GDP growth this year, he said.
The US's final reciprocal tariff rate on Thai imports is unknown, and a high rate would weaken Thai manufacturers' and exporters' competitiveness in the global market, said Mr Tanit.
Meanwhile, the Thai-Cambodian territorial conflict is also straining the economy, and leaders are needed to address the situation, he said.
The suspension of Ms Paetongtarn only added to the lack of trust in the prime minister, said Mr Tanit.
"When businesspeople step away from their roles, they are ordinary individuals sharing the same feelings as other people," he said.
CONSISTENT ENERGY POLICY
Key energy development plans should remain intact even if there is a new premier, said Praipol Koomsup, an economist at Thammasat University who was a committee member under former energy minister Narongchai Akrasanee.
One state project he pushed for continuity on is a direct power purchase agreement (PPA) that allows companies to buy renewable power directly from producers.
Peer-to-peer renewable power trade was prohibited in Thailand, but the National Energy Policy Council approved a pilot project on direct PPA last year to facilitate sales of clean power to data centre projects.