Back to the future: Thailand is likely again in political stalemate, limiting its ability to cope with economic challenges

Thailand elections on 24 March still do not have official results but observers are already cautious on the implications for the new government to make decisive choices. Based on local newspapers calculation, the opposition, which needed 376 votes in the lower house (the 250 seats in the upper house are appointed by the military) to form a functioning government and appoint a prime minister, is likely to fall short of that. However, it likely, with its 7-party coalition, has enough vote s to block legislations. Meaning, Thailand is headed towards a political deadlock even before the results are finalized. And this is bad news for the country as it more than ever needs a decisive government to deal with weakening global demand, fierce competition, deteriorating demographic trends (both contracting working age population and declining of total population), high household indebtedness, and lack of diversification on sources of growth, to name a few. Thailand growth rates in recent years have been buoyed by a push for infrastructure investment, consumption and a rise of tourism, especially the rise of inbound Chinese tourists. Meanwhile, its exports have been languishing and global market share of exports deteriorated as both a strong baht and lack of policy direction limited competitiveness. As Chinese inbound tourists slowed (tourism made up 12.5% of GDP and Chinese tourists contribute one fourth of that) due to worsening domestic conditions, Thailand is vulnerable. European tourists are slowing too as the region loses steam. Meanwhile, the deadlock government means that the opposition can take steps to blunt the infrastructure push, limiting its key sources of growth. While Thailand is likely to be capable of dealing with short-term volatility of global demand well thanks to its ample savings and current account surplus, its worsening demographics will inevitably push downward pressure on growth. And Thai households, especially rural ones, are already stressed from high household debt. The burden of an aging economy will likely mean that Thailand will be old before it can escape the middle - income trap.