Thailand’s Finance Minister Resigns with Six Others

Thailand’s finance minister, Uttama Savanayana, is one of six ministers holding critical economic dockets to have resigned recently. This is amidst the effects of Coronavirus on a heavily tourism-dependent country.

The deputy Prime Minister, Somkid Jatusripitak, also resigned. This left the country in a chaotic predicament, with the Prime minister Prayuth Chan-ocha announcing a reshuffle by August.

Thailand’s economy will experience the worst contraction in the region. This is despite being one of the Asian countries that have handled the Coronavirus crisis fairly well. This is also amidst a history of prolonged political instability and the highest recorded number of modern-history military coups.

Thailand’s citizens have recently taken to the streets on pro-democracy protests to pressure for the resignation of the entire government. It is now under the current ruling coalition party, Palang Pracharath.

According to the country’s economic planning agency, the National Economic and Social Development Council, Thailand will contract by 5% in 2020. So far, the Thai baht has registered a 6% loss against the US dollar. The country’s benchmark stock index SET Index, down up to 13% by Q2 2020.

Intensified Internal Power Struggle inside the Ruling Party

Palang Pracharath, together with its political allies, does now control a majority percentage inside the House of Representatives, which has 500 members. According to earlier reports, members of the party have been in an intensified power struggle. It led to the six ministers to quit the party, prior to resigning from their cabinet positions.

During the resignation press conference, the now-former finance minister Savanayana stated:

“We believe that this could help the country move forward, get rid of the uncertainty. We believe that we can help reduce the political pressure the prime minister might be facing.”

Experts have expressed their concern over the poor timing of the resignations. They have put massive pressure on the Prime Minister to reshuffle the cabinet as soon as possible. According to Harrison Cheng, lead analyst and associate director of Control Risks consultancy in Thailand, the upcoming reshuffle has triggered intense competition among potential new appointees of the ruling party.

Cheng also observed that, while the PM is obligated to choose the best-qualified candidates for replacement, the competitive atmosphere will inevitably cause “deep resentment” among the various political factions fighting for top cabinet positions.

”Disagreements are likely to flare up both within the Palang Pracharath Party (PPPRP and among coalition members, and could delay the finalization of the reshuffle by up to two months, which is likely to hurt investor confidence. “ Cheng said.

Reshuffling May Alter Fiscal Measures, Analysts Speculate

In May, Thailand’s parliament approved a bill to implement a $58 billion (1.9 Trillion baht) stimulus package. This would support the economy against adverse effects due to coronavirus lockdown measures.

The measures led to the government announcing an expected major deficit of up to 32.8%. This would be 623 billion baht ($20.14 Billion). Meanwhile, spending has risen to 3.3 trillion baht for the fiscal year of 2021, starting from October 1, 2020.

“The Thai economy remains highly uncertain and may perform worse than forecast if the COVID-19 outbreak continues.” Said Prime Minister Prayuth Chan-ocha.

Thailand is likely looking at more negative economic news ahead. This is just like the global economy, which faces the risk of a double recession. Analysts now expect that, while the reshuffle may not alter the planned government spending, it will most likely interfere with fiscal measures execution.

“The resignation of Somkid, who was the architect of Prayuth’s economic policies, causes some policy uncertainty at a critical time when the economy is going through a deep recession.” Said Analysts from Nomura Bank in Japan.

Mirroring those sentiments, other analysts from ANZ bank from Australia said that the departure of the top minister will not affect the highly politically unstable country, but only the process of re-engineering a recovery.

As the second largest economy in SouthEast Asia, Thailand entered into recession in May.