Asia Economy

Thailand is losing key economic ministers as country tries to recover from coronavirus-induced slump

Key Points
  • Thailand has over the past week lost several government ministers — including those holding crucial economic portfolios — as the coronavirus pandemic slams the tourism-dependent Southeast Asian economy.
  • Six ministers have resigned, including Finance Minister Uttama Savanayana and Deputy Prime Minister Somkid Jatusripitak, whom a Reuters report referred to as an "economic policy czar."
  • It's not yet clear who will take over those positions, but Thai Prime Minister Prayuth Chan-ocha has said he will announce a cabinet reshuffle by next month.
  • The Thai economy is expected to register the worst contraction in Asia this year, while its currency and stock market have also been among the worst performing in the region despite its relative success in containing the virus outbreak.
Chinese tourists with face masks watch a traditional Thai dance at Erawan shrine, a popular spritual landmark in Bangkok on January 27, 2020.
Mladen Antonov | AFP | Getty Images

Thailand has over the past week lost several government ministers — including those holding crucial economic portfolios — as the coronavirus pandemic slams the tourism-dependent Southeast Asian economy.

The country has a history of political instability and has also experienced one of the highest numbers of military coups in modern history. The latest upheaval has come at a time when the government faces pressure to improve the country's economy while large-scale pro-democracy demonstrations have called for the resignation of the government.

So far, six ministers have resigned from their position, reported Reuters. That include Finance Minister Uttama Savanayana and Deputy Prime Minister Somkid Jatusripitak, whom the Reuters report referred to as an "economic policy czar."

The resignation of Somkid, who was the architect of Prayut's economic policies, causes some policy uncertainty at a critical time when the economy is going through a deep recession.
Nomura analysts

It's not yet clear who will take over those positions, but Thai Prime Minister Prayuth Chan-ocha has said he will announce a cabinet reshuffle by next month. Some analysts said delays in replacing the country's crucial economic architects could hurt investor confidence at a time when the Thai economy is expected to register the worst contraction in Asia this year.

The Thai currency and stock market have also been among the worst performing in the region despite the country's relative success in containing its virus outbreak. As of Tuesday, the Thai baht had lost around 6% against the U.S. dollar while the benchmark stock index, SET Index, has fallen close to 13% so far this year.

'Intense jockeying for cabinet seats'

The ministers' resignations followed earlier reports of a power struggle within the ruling coalition's largest party, Palang Pracharath. The party and its political partners control a slim majority in Thailand's 500-member House of Representatives.

Before their resignation from the government, four of the ministers — including former Finance Minister Uttama — quit Palang Pracharath as party members, reported the Associated Press. Uttama was leader of the pro-military party.   

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Harrison Cheng, associate director and lead analyst for Thailand at consultancy Control Risks, said the cabinet reshuffle has triggered an "intense jockeying" for government positions among members of the ruling coalition. That could also worsen infighting among members, he added.

He explained in a note last week that the prime minister's plan to recruit "reputable individuals" from the public and private sectors to lead several economic ministries will "trigger deep resentment" among the different political factions.

Disagreements are likely to flare up both within the Palang Pracharath Party (PPRP) and among coalition members, and could delay the finalisation of the reshuffle by up to two months.
Harrison Cheng
Control Risks

Still, the Prayuth government is likely to stay intact as parties within the ruling coalition have little to gain from withdrawing, said Cheng. The opposition also doesn't have the numbers to challenge the ruling coalition, he added.

"Disagreements are likely to flare up both within the Palang Pracharath Party (PPRP) and among coalition members, and could delay the finalisation of the reshuffle by up to two months, which is likely to hurt investor confidence," wrote Cheng.

Prayuth has reportedly invited a top Thai banker to join his new cabinet lineup. Some local media reports also named the country's outgoing central bank governor Veerathai Santiprabhob as a possible candidate — but Reuters reported that Veerathai has ruled out joining the new cabinet.

Political uncertainty 'not new'

The Thai economy, which is heavily dependent on tourism, is expected to register the worst economic contraction in Asia this year, according to forecasts by Capital Economics. The consultancy projected Thailand's gross domestic product to slump by 9% in 2020.

The Thai parliament in May approved a 1.9 trillion baht ($59.8 billion) economic stimulus and the government has penciled in a larger deficit for its fiscal year starting Oct. 1 as it seeks to revive the economy.

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Analysts from Japanese bank Nomura said in a note last week that they don't expect changes in the cabinet to substantially alter the government's spending plans. But "there may be some concerns over the execution of fiscal measures," they added, pointing to the departure of the former Deputy Prime Minister Somkid.

"The resignation of Somkid, who was the architect of Prayut's economic policies, causes some policy uncertainty at a critical time when the economy is going through a deep recession," read the note.

But analysts from Australian bank ANZ said in a note last week that "political uncertainty is not new to Thailand." They added that despite the departures of key economic ministers, they expect Thailand's policy to "remain focused on engineering a recovery."