Bangkok: Thailand’s economy was recovering well this year from the global financial crisis, with first-quarter GDP growing twice as fast as expected, but violent protests since April have taken their toll and the outlook is uncertain.
“Red shirt” anti-government protests were broken up by the military on 19 May, sparking riots and arson that destroyed part of the country’s biggest shopping mall and closed down banks for two days.
The full extent of the damage was still being worked out as Bangkok got back to work this week.
Below are details so far available of the impact on companies, tourism and the $264 billion economy, dependent on exports of manufactured goods but also the world’s biggest shipper of rice and rubber.
What’s the likely economic impact?
The economy grew 3.8% in the first three months of 2010 from the previous quarter, double the consensus, but economists and the government are worried the second quarter will see a contraction.
The violence has scared off tourists, dented consumer confidence, rattled investors and caused huge damage in Bangkok, effectively closing down much of the central commercial district for over six weeks from 3 April.
The National Economic and Social Development Board (NESDB), which compiles GDP data, said the turmoil since April had already cut growth by 1.5 percentage points. It is forecasting 3.5 to 4.5% for this year.
After an extremely strong first quarter, finance minister Korn Chatikavanij said the economy could have grown 7% in 2010 but for the unrest, which could cut it by up to two points. He maintained his forecast of 4.5 to 5.0% for the year.
The NESDB was optimistic there would be some growth in the second quarter from the first, but economists were less sure and Korn said he would be surprised if there was any.
Pimonwan Mahujchariyawong at Kasikorn Research Center said the economy could shrink by at least 4% from the first quarter. David Cohen at Action Economics in Singapore forecast it could be about 2.5%.
What about tourism?
Images of the worst political violence in modern Thai history and travel advisories by Western and Asian governments will make foreigners think twice before coming to Thailand, where tourism accounts for 6% of the economy and employs at least 15% of the workforce.
In 2009, also marred by political violence, 14.1 million tourists arrived.
The state Tourism Authority of Thailand has cut its target for arrivals this year to 13 million from 15.5 million and slashed its revenue target by a fifth to 480 billion baht ($14.8 billion).
The NESDB and the Tourism Council of Thailand, a private sector body, have cut their targets for arrivals to 13 million from 16 million.
Arrivals rose 28.4% to a record 4.7 million in the first quarter of 2010.
Official arrival statistics for April and May are not available but data from Airports of Thailand gives some guide.
The number of passengers using Bangkok’s main Suvarnabhumi airport from 1-18 May dropped 7.8% from a year earlier to 1.62 million, before plunging on 19 May, when the military moved in to end the protest in the early hours.
On 19 and 20 May passengers dropped by around half from a year earlier to 50,000 and 62,000 respectively.
Occupancy rates in the budget hotels in the Khao San Road area popular with backpackers plummeted from a normal 80% to, at best, 10% at the weekend.
At the other end of the price scale, the 420-room Sheraton Grande Sukhumvit Hotel has seen occupancy fall to 30% from 80% earlier in the year.
What is the cost to business?
The biggest loss has probably been suffered by Central Pattana PCL, whose Central World shopping mall -- the second-biggest in Southeast Asia -- was set on fire as the troops closed in on the protesters on 19 May.
The firm said it would delay renovation of a mall in Ladprao, Bangkok, to February 2011 from the end of this month to compensate for lost revenue from Central World.
The company said it had $100 million of insurance cover for terrorism and riots, plus industrial cover of 13 billion baht, which included business interruption insurance.
Central World was at the heart of the Rachaprasong area where the “red shirts” set up camp from 3 April, closing several malls from that date. Luxury hotels in the area also had to close.
Central Plaza Hotel said it would reopen its Centara Grand at Central World hotel and conference centre on 1 June. It now expected 2010 revenue to rise 10% at most rather than 12-15%.
Hotelier Dusit Thani said it had 1.4 billion baht in terrorism insurance and the damage was being assessed.
Hotelier Erawan Group said it had cut its 2010 revenue estimate by 20%. Combined revenue at two hotels -- the Grand Hyatt Erawan and Courtyard by Marriott -- in April and May would drop 150 million baht from last year because of the protests.
BEC World, operator of Channel 3 TV, said it lost about 120 million baht in advertising revenue due to an arson attack that forced its television station off the air.
The various malls in the area had combined revenue of around 5.2 billion baht in a normal month, said Fafuen Temboonkiat of the Rachaprasong Square Trade Association.
The Bank of Thailand told banks to close last Thursday and Friday for security reasons. At least a dozen bank branches were burnt during the riots.
The banks are still assessing the cost. The second-largest, Krung Thai Bank, has said both profit and loan growth would be hit by the unrest.
It had planned to raise its 2010 loan growth target to “double digits” from 7% after a strong first quarter but that is now under review.