Analysis – Constitutional Court’s ruling could hamper Srettha’s grand plan of economic growth

Thailand’s economic growth that has been among the lowest in the region, is set to suffer further as political vacuum and uncertainties are likely to weigh in on the investment and growth prospects after the Constitutional court decided to hear the case against the 10-month-old government of Srettha Thavisin.

The Constitutional Court yesterday decided to take up the petition filed by 40 outgoing Senators which stated that the Prime Minister breached article 160 (4 & 5) that relates to the appointment of people who are ‘morally’ sound to the position of a Minister.

During the Cabinet reshuffle on April 28th Srettha appointed Pichit Chuenban, a former lawyer whom the Thai Bar Association had stripped off its list to be able to practice law in Thailand after an incident of him trying to bribe Court officials with 2 million Baht in ‘snack’ bag. Pichit was sentenced to 6-months of jail.

The 40 Senators, whose names have yet to be revealed, said that such although the Thai Constitution allows a person who is jailed to be able to hold political office after 10-years of them getting out of jail, another clause in the charter states the ‘moral’ issue which states that the minister has to be ‘morally’ clean to be able to be appointed to that position.

The Constitutional Court took up the case with 6 of the 9-member bench agreeing to accept the case for consideration.

What was more shocking was the fact that 5:4 vote that gave Srettha the breathing space to be able to continue on his job. The court usually suspends those under active investigation from performing their duties and if it was not for the Nakharin Mektrairat, President of the Constitutional Court’s vote, the Prime Minister would have had seen his active role suspended while he was in Tokyo attending a seminar.

In decision making the President of the Constitutional Court is usually the last one to make a call and if the President’s vote was taken away from the 5:4 vote that was seen, then it would be a tie with 4:4.

Lame Duck Prime Minister until Verdict

Such a close call by the Constitutional Court is likely to leave Srettha in a situation that would be categorized as ‘lame duck’ up until at least the court hands down its verdict, political pundits say.

They say that with such a close call, the likelihood is that businesses are unlikely to be interested in hearing what the Prime Minister wants to say or what he envisions in the years ahead, instead they would only listen and not act because of fear that if things go south, then a new policy would be implemented.

The same case would be possible for the civil services, who have been stubbornly adamant to follow the policies even when this decision by the Constitutional Court was not there but with the decision and with the future of Srettha hanging by a thread, these civil servants may simply go on neutral gear and thus stalling any possible growth prospect.

Even the Federation of Thai Industries (FTI) has come out to state that such a decision by the court has made many investors curious and the FTI said that it only hopes that the hiccup is a short lived one.

Strong Headwinds Ahead

The already strong headwinds that economists have been calling out over the past few months is likely to intensify as political uncertainties take a deeper route into the decision-making process for businesses.

The National Economic & Social Development Council (NESDC) on Monday released the Q1 2024 gross domestic product (GDP) which came in at just 1.5% year-on-year growth, while other countries in the region saw a robust growth with the 2nd lowest GDP growth coming from Singapore at 2.7%. over the past 3-years (2021-2023) Thailand’s GDP has only seen the best growth in 2022 at 2.5%, a year when all other countries saw growth of nearly 4-9%.

Even the NESDC said that high household debts and the continued high interest rates (charged by banks on clients) were keeping the economic growth at subpar levels.

Pipat Luengnaruemitchai, economist at Kiatnakin Phatra Securities also said that there were problems that needs to be handled and among them is the high household debt, higher interest rates, and deterioration in banks’ asset quality. These things, he says, has prompted the system loan growth turning negative again in Q1 2024, as banks are more reluctant to lend.

“Thailand faces several structural headwinds, including shifts in technology and demand, demographic changes, and competition from cheap imports. These challenges could cap growth potential without substantial reforms. The long-term growth potential may have declined from 3.0-3.5% pre-COVID to 2.5-3.0%. Aggressive reforms are needed to maintain growth above 3% in the medium term” Pipat said in a note to clients yesterday.

His estimates GDP growth forecast for Thailand at 2.6% for 2024 and 2.8% for 2025.

This assessment by Phatra was not taking into consideration the political fallout that took place late afternoon yesterday after the Constitutional Court’s decision.

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Author: Thanaphum Charoensombatpanich