March 21, 2019 / 3:48 AM / a year ago

Breakingviews - Thailand's vote may solve just one problem

Prime Minister Prayut Chan-o-cha greets the audience at the opening ceremony of the 2nd Thai-Myanmar Friendship Bridge in Mae Sot, Thailand, March 19, 2019. REUTERS/Ann Wang

SINGAPORE (Reuters Breakingviews) - Thailand’s long-awaited vote may solve just one problem: the poll itself. Sunday’s ballot ends five years of direct military rule. For investors, the best outcome is an uncontested one, even if the junta leader stays on as prime minister. A democracy of sorts could well encourage some inward capital flows, and planned infrastructure spending will help growth. Unfortunately, none of the likely winners appear ready to tackle the deeper woes of this sclerotic economy.

    The election, repeatedly delayed by the military leaders, has not been without drama. There was a burst of excitement last month when the king’s sister stepped into the fray as candidate for a populist party, but the move was quickly quashed. A selfie-taking billionaire emerged to energise young voters. But the real battle is being fought across traditional lines, pitting royalist, pro-army factions against parties linked to ousted ex-premier Thaksin Shinawatra, who is popular with rural voters.   

    In one sense, the bar is low. Having an election at all is a step forward, even under contrived, junta-written electoral rules which could help the current prime minister, Prayuth Chan-ocha stay on. The tension has weighed on a local equity market, for one, where foreign investors have sold a net $500 million of stock so far this month.

    Thus an outcome accepted by all sides would be a win too. Capital Economics estimates that unrest in 2013-2014 took 0.7 percentage points off growth. Tourism, after all, generates almost a fifth of GDP in this $460 billion economy.

   Whoever takes over will press on with a planned splurge on roads and bridges, including a $45 billion blueprint for the country’s industrial east. But Thailand’s economic problems run too deep to be fixed by the populist measures on show, like cash handouts and subsidies for rice farmers. Too many Thais still depend on agriculture at this stage of development. Labour productivity growth has been anemic, and lags neighbours.

    The Bank of Thailand on Wednesday cut its 2019 growth forecast of the second time in three months, to 3.8 percent; exports have softened and inflation is weak. A peaceful election would at least not worsen matters. Unfortunately, necessary but painful reforms, from tackling the cost of an ageing population to corruption, appear some way off.


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