Thailand Braces for Economic Backlash

By STEPHEN WRIGHT / AP WRITER

BANGKOK—Thailand's already faltering economy is bracing for a fresh blow as the shutdown of the country's main airport by protesters entered its third day, stranding thousands during the tourist high season, disrupting exports and spooking investors.

Tourism losses alone in the remainder of this year could run to 150 billion baht ($4.2 billion), equal to 1.5 percent of gross domestic product, with "devastating repercussions" for the economy, CIMB economist Kasem Prunratanamala said on Thursday.

Other vital pillars of the economy are also being hit, with exports of fresh produce and electronic components hurt as dozens of airlines cancel flights, and foreign investors pulling funds from a stock market already stricken by the global financial turmoil.

"If this crisis goes further, we will lose much more," said Thai Chamber of Commerce President Pramon Sutheewong.

"The confidence in Thai exporters is deteriorating, foreign importers are in doubt about our ability in deliver products on time and there is a high tendency that they will divert their orders to some place else," Pramon said. "That's what we are concerned about the most."

Beyond deterring tourists, the airport shutdown also halts exports of perishable produce such as fruit and vegetables and shipments of electronics components to places like Japan, said Federation of Thai Industries chairman Santi Vilassakdanont.

"After one, two or three days there will be a production problem for electronics makers because their stockpiles of unsent goods will become too high," he said.

Losses on outbound shipments of car parts, fresh fruit and vegetables, live fish and orchids could run 2 billion to 3 billion baht a day ($57 million to $85 million), said Tanit Sorat, the federation's vice chairman.

All flights in and out of Bangkok's Suvarnabhumi were canceled after protesters took over terminals Tuesday in an attempt to unseat Prime Minister Somchai Wongsawat's government, which they claim is a puppet for ousted premier Thaksin Shinawatra. It was the latest escalation in a sometimes violent four-month campaign by protesters to bring down the government.

On Wednesday night, protesters overran a second smaller airport that mainly serves domestic routes, cutting off all commercial flights to the capital of Southeast Asia's second-biggest economy—an important manufacturing hub for automakers like Toyota Motor Corp. and General Motors Corp.

Thailand's economy is already in a fragile state, growing at 4 percent in the third quarter —the slowest pace in more than three years—because of the political unrest and the global financial crisis. Some economists say growth next year will slump to about 2.5 percent from the 4.5 percent expected for this year—a forecast that doesn't factor in the latest woes.

Tourism, a vital industry that makes up 6 percent of the economy, will take the main hit from the airport shutdown.

CIMB's Kasem Prunratanamala said about half of 4 million tourists expected between now and the end of the year could cancel their trips, with spillover affects outside tourism such as lower spending at shopping malls and other retailers. The effects will linger into 2009, he said.

Up to 20 percent of the 1 million employed directly and indirectly by tourism could lose their jobs, said Tourism Council of Thailand boss Kongkrit Hiranyakit.

Tourism Minister Weerasak Kowsurat said airport closures not only drain the coffers of airports and airlines but deprive the country of 80,000 free-spending tourists each day and, most troubling, tarnish the country's image as safe place to travel.

"If we can't solve this problem soon enough, the memory of people in general about traveling in Thailand will be heavily damaged," Weerasak said.

Neighboring countries have voiced concern that Thailand may not be able to host the annual Asean summit for 10 southeast Asian nations, scheduled to take place Dec. 15-18 in the northern city of Chiang Mai. Thailand insisted on Thursday that the meeting will go ahead as planned.

Jittery foreign investors pulled a net 1.5 billion baht from the market on Wednesday, the second highest selling by foreigners this month, adding to the 150 billion baht that they have withdrawn from the market this year. On Thursday, Thailand's benchmark stock index sank 1.4 percent—even as most other Asian markets advanced.

"It's a nightmare scenario. I can't tell clients to buy Thai shares if they can't even get into the country," said Andrew Yates, a vice president of foreign institutional sales at Asia Plus Securities in Bangkok. "It seems like it's easier to get into North Korea than it is to Thailand."