Thailand: Watching the Politics

  The government led by Srettha Thavisin of the Pheu Thai Party (PTP) will face challenges from within the coalition intermittently, as it attempts to balance pro-monarchy order against reforms aimed at furthering democracy.  Although the legislative election in 2023 saw the Move Forward Party (MFP) gain maximum vote share the inclusion of military-aligned parties with the PTP ensure that a coalition government was formed and sidelining the MFP.

Despite the ruling coalition's substantial majority in the House of Representatives, consisting of 314 seats out of 500, internal differences among constituent parties will pose significant hurdles. The military-aligned Phalang Pracharat (PP) and United Thai Nation (UTN) parties, former rivals of the PTP, are keen on maintaining the existing political order that favors the army and establishment, in contrast to the PTP's commitment to greater democracy. Meanwhile, the alliance between the PTP and military-aligned parties has left both reformists and conservatives disheartened.  We would note that this collaboration thwarted the anti-establishment Move Forward Party (MFP) from assuming power and advocating for monarchy reforms. Notably, the PTP's traditional "redshirt" supporters, who once fought against the military's role in governance, are now finding themselves disillusioned and this over the medium term will pose a challenge. Another factor undermining the party’s anti-military stance is the recent return of Thaksin Shinawatra, the de facto leader of the PTP and a former prime minister. Thaksin, benefiting from a royal pardon reducing his eight-year jail sentence to one year, currently resides in a hospital, citing health issues, further reinforcing perceptions of power abuse. The leadership transition with Thaksin's daughter, Paetongtarn, becoming the new PTP leader also underscores the dynastic nature of the party.

On the opposition front, the Move Forward Party (MFP) faces a grave accusation – attempting to overthrow the constitutional monarchy through its campaign to amend the lese-majesty law. The Constitutional Court is set to deliver its verdict end-January 2024, with expectations that the party dissolution will be avoided to prevent an increase in anti-monarchy sentiments. However, if the MFP were to dissolve, large-scale protests could ensue, potentially disrupting business operations. Nevertheless, it is anticipated that strict measures by security forces will be employed to maintain control and prevent significant political instability.  This all leaves the political violence measure at high and legal and regulatory risk at medium-high.

Looking ahead, the PTP-led government plans a constitutional referendum, foreseeably resulting in democratic reforms without explicitly challenging the royal-military establishment. Proposed amendments include electing, rather than appointing, the Senate (the upper house) to diminish the army's political role. Despite these changes, the current prime minister's position is unlikely to shift, given the ruling coalition's comfortable majority in the House of Representatives. We note though that Thailand's political landscape has witnessed a series of political coups and therefore a minimal risk of a coup cannot be entirely ruled out. This is likely only in the event of persistent and serious conflicts between the PTP and the military.

Meanwhile, a localized insurgency persists in Thailand's southern provinces, primarily Muslim-majority areas, involving low-level attacks on security forces. The risk of escalation following the Gaza conflict is considered modest, presenting a minimal threat to overall political stability.

On the macroeconomic front, the swing back to current account surplus is slower than expected, as tourism is taking time recovering to 2019 levels – partially as China tourists are travelling less overseas.  Government debt/GDP has stabilized at 62% but is not coming down and this accounts for the medium rating for sovereign non-payment.