A delay in government formation in Thailand amid the continuing political uncertainty is weighing on Thai business sentiment, in turn threatening to dent overall economic activity.
The Industries Sentiment Index, which measures sentiment over the next three months, dropped for the third straight month in June to 102.1 from 104.3 a month earlier, according to the Federation of Thai Industries’ survey of more than 1,300 manufacturers released Monday. Apart from political risk, a fragile global economy and drought are also key concerns for businesses.
“A long delay in the new government formation will have a major impact on the economy,” said FTI Chairman Kriengkrai Thiennukul. “If we have no one who has the full power to handle the economy, the impact from other negative risks like drought may be stronger.”
More than two months after a general election, Thailand is yet to get a new government after conservative parties and military-appointed senators blocked the attempts by pro-democracy leader Pita Limjaroenrat to lead the next administration. A caretaker government under Prime Minister Prayuth Chan-Ocha has limited power to pass policies or approve spending, which could hurt business and investment activity in Southeast Asia’s second-largest economy.
The economy still has a chance to meet the growth forecast of 3%-3.5% this year if the new government is in place within August, Kriengkrai said. Rising tourist arrivals have been the key driver to the nation’s economy this year, helping lift the industries sentiment index in June for the first time in three months.
“The impact of the delay is so hard to estimate,” he said.
