Paetongtarn's suspension hits Thailand's troubled economy

Bangkok Post

4 days ago

Thailand's ruling coalition was already fraying when a court suspended Prime Minister Paetongtarn Shinawatra on Tuesday, raising fresh doubts about her survival, the country's economy and the future of a dynasty that has loomed over the Southeast Asian nation for decades.
In a blow to a country long plagued by political instability, the Constitutional Court sidelined the 38-year-old leader over a complaint linked to a leaked phone call in which she appeared to criticise the army and side with Cambodia in a border dispute — a potential breach of conduct under the constitution. She has 15 days to respond. For now, Deputy Prime Minister Suriya Jungrungreangkit leads a shaky coalition.
The developments could not come at a worse time for Thailand: once feted as an Asian Tiger economy for its export-led growth, the country is mired in slow growth relative to its peers, with households burdened by debt, a budget bill outstanding and the imminent threat of United States President Donald Trump's tariffs weighing down expectations. The government slashed its 2025 growth forecast by a full percentage point to 1.3% in May.
Over at the central bank, Governor Sethaput Suthiwartnarueput is due to leave Sept 30, and a successor has yet to be named.
'No one is at the helm and the Thai ship is going nowhere,' said Thitinan Pongsudhirak, a professor of political science at Chulalongkorn University (CU) in Bangkok. 'The budget bill has to be passed, so that's coming up with the wobbly, weak coalition government.'
Amid all the turmoil, the Bhumjaithai Party, the ruling coalition's biggest partner, exited last month following weeks of infighting, and there is no guarantee now others that had promised to stay will not follow.
The court has yet to say how long it will deliberate, while a prolonged delay risks deepening the political vacuum, said Napon Jatusripitak, acting coordinator of the Thailand Studies Program at ISEAS-Yusof Ishak Institute.
'Thailand appears destined for a prolonged struggle to find a new prime minister and a political deadlock that could jeopardise the country's already fragile economic situation,' he said.
Looming over everything is Thailand's influential military, which has led about a dozen coups since the kingdom's absolute monarchy was abolished in 1932 and has long been a key power broker in the country.
The military and pro-military political parties were the key forces behind Ms Paetongtarn's eventual ascension to power after a key opposition party could not secure enough support to form a government following national elections two years ago. That uneasy alliance paved the way for her father, Thaksin Shinawatra, to return from a long exile.
Even with the court's suspension, Ms Paetongtarn is not totally sidelined from power. Hours before the ruling Tuesday, she was named culture minister in a reshuffle expected to keep her in government. The new cabinet will be sworn in Thursday. But the damage may be permanent. A recent poll showed Ms Paetongtarn's approval rating at 9.2%. Thousands have protested, calling for her resignation.
Ms Paetongtarn said Tuesday she accepts the court's ruling but gave little clarity on her future. 'I'm still a Thai citizen,' she said. 'I will continue to work for the country while my duties are suspended.'
Even so, fears are growing the government could collapse before the next budget passes. The 2026 fiscal plan, due by August, is at risk. Burin Adulwattana, chief economist at Kasikorn Research Centre (KRC), said a lame-duck government would add uncertainty, hurting the baht and stocks.
'Big trouble'
'A key impact will be felt if the political turmoil leads to a budget delay,' he said. 'Without it, the economy will have big trouble.'
The baht fell 0.1% on Wednesday morning. The yield on Thailand's benchmark 10-year bonds was little changed after declining three basis points a day earlier. The benchmark stock index, the world's worst-performing major equity market globally this year, rallied 1.9% Tuesday on expectations that Ms Paetongtarn's suspension will help reduce political tension.
Whether things play out that way is far from certain.
'This suspension exerts further downside risk to a growth outlook already mired in uncertainty from US tariffs,' said Lavanya Venkateswaran an economist at Oversea-Chinese Banking Corporation (OCBC) in Singapore. 'The real question is what next. That needs to be answered sooner rather than later considering the stakes.'
If the court ultimately rules against Ms Paetongtarn, she will be removed from office, triggering a parliamentary vote to pick a replacement from a list submitted before the 2023 election. Along with her father and aunt Yingluck, Ms Paetongtarn would be the third of the Shinawatra clan to be removed from office.
Potential replacements
Possible successors include the ruling Pheu Thai Party's Chaikasem Nitisiri, Bhumjaithai's Anutin Charnvirakul, United Thai Nation's Pirapan Salirathavibhaga, and the Democrat Party's Jurin Laksanawisit.
Former prime minister Prayut Chan-o-cha, who led the last coup, is also eligible. And while a military takeover is always possible in Thailand, frustration over the country's economic performance under Gen Prayut ultimately pressured his government to allow for elections.
'The decision by the court today has heightened the coup risk a bit, but the last time they had a coup, they did not do well,' said Mr Thitinan of CU.