Prayuth Chan-ocha may have stacked the deck and  won a second term, but rescuing the economy will prove much harder than rigging the election. Mr Prayuth, the leader of Thailand’s 2014 military coup, is unlikely to succeed. 

The new administration, which begins official work this week, inherits the same floundering economy that Mr Prayuth seized in the May 2014 putsch. The former army chief did little to mend it over the previous five years, despite wielding almost unlimited power. He now exchanges that for the weakest coalition government Thailand has seen since the 1990s. This will make it far more difficult to pass legislation. 

If anything, economic conditions have become more challenging since the coup. GDP growth hit a four-year low of 2.8 per cent last quarter, global trade headwinds have pushed exports into contraction, and private consumption has fizzled. Meanwhile, the government’s fiscal position has steadily worsened. 

Rather than attempt bold reform, Mr Prayuth will continue to dish out the junta’s established recipe of increasingly populist economics, such as cash distributions and subsidies for farmers, along with a side of infrastructure spending. This approach will give the economy a short-term boost — at the expense of the government’s balance sheets — but it is not enough to repair its long-term trajectory. 

Sick, getting sicker 

Mr Prayuth resumes office with the Thai economy squarely on the back foot. Since 2014, GDP growth has limped along at an average 3.6 per cent, far slower than the other Asean 5 economies, which have expanded at rates of between 5 and 6.2 per cent in that time. 

The World Bank recently cut its 2019 growth forecast for Thailand to 3.5 per cent from 3.8 per cent, while Thailand’s National Economic and Social Development Council, which calculates official GDP, now targets 3.3 per cent to 3.8 per cent, down from 4 per cent. 

These numbers may be trimmed again soon. The government recently announced a three-month delay to disbursing the budget for fiscal 2020, from October to January. The Fiscal Policy Office expects a blow to the economy of Bt70bn-Bt80bn ($2.3bn-$2.6bn) as a result. 

The main reasons for the slowdown are persistent weakness in goods exports and in private consumption, each equivalent to a little less than half of Thailand’s GDP. 

A weakening global economy saw Thai exports fall 2.5 per cent in the six months to April, reversing the steady growth recorded during most of 2017-18. In the five years since the coup, exports in dollar terms have averaged barely 2 per cent annual growth, while the contribution of exports to GDP has dropped by 10.1 percentage points. Private consumption has improved slightly of late but has nonetheless slipped to 47 per cent of GDP from 52 per cent over the same period. 

Thailand’s primary consumer confidence index hit a 19-month low in May. A more stable political situation may buoy sentiment, but many Thai consumers have doubts about the new government’s longevity. In a June survey by Thailand’s Suan Dusit Poll, 74 per cent of respondents said they did not expect the administration to survive its four-year term. 

More populism on tap — and more debt

All signs indicate that Mr Prayuth will cling more tightly to populist economics in his second term. He needs to stimulate the economy, woo a sceptical electorate and keep his fractious 19-party coalition happy with plenty of pork. This will help keep the economy afloat but increase longer-term fiscal pressures. 

Public debt has risen steadily under Mr Prayuth, climbing to 34 per cent of GDP last year from 30 per cent in 2014. The credit rating agencies are not yet alarmed — Thailand has lower public debt levels than Malaysia, Indonesia or Vietnam — but debt could easily reach 40 per cent of GDP within four years. 

In his second term, Mr Prayuth will need to deliver on pre-election promises made by Palang Pracharat, the core pro-military party, that turned increasingly populist as the election grew nearer. The party pledged to raise the minimum wage by roughly 30 per cent despite concerns within Thai industry and the fact that this is a facsimile of a similarly controversial move by the previous government, which was ousted in the coup. Palang Pracharat also campaigned on minimum prices for key crops that are above market rates. 

Mr Prayuth’s new government will almost certainly continue to expedite major infrastructure projects, which are a high priority for the junta, though it may take more time to push them through an elected parliament. The largest developments include a Bt225bn high-speed rail link between Bangkok’s two international airports and U-Tapao International in Rayong province, and the China-backed high-speed line between Bangkok and the Thailand-Laos border at Nong Khai, likely to cost over Bt300bn. The Eastern Economic Corridor (EEC), a buildout of Thailand’s largest industrial zone and main deep seaport, will remain the economic flagship for the new government. 

Prayuth 2.0 has a short life expectancy

Investor relief that Thailand has a new government may not last. Within the 254-seat majority coalition, Palang Pracharat and its one staunchly committed ally control just 121 seats — the other 17 parties command 137 seats and have purely mercenary interest in supporting Mr Prayuth. One small party with two seats is already threatening to walk. 

The loss of a lower-house majority would not immediately cost Mr Prayuth the premiership because the military has stacked the senate and written other backstops into the constitution. Nonetheless, it would mean the government ceasing to function properly, and Mr Prayuth could be challenged with a vote of no confidence, probably precipitating his exit — and risking another coup. 

Even if the coalition does hold, Mr Prayuth faces a hardened opposition that needs just a handful of MPs to turn the tables. The risk of street protests — a hallmark of Thai politics — will also be elevated: Netiwit Chotiphatphaisal, one of Thailand’s highest-profile student activists, recently tweeted that “[we] should learn from Hong Kong”.

FT Confidential Research is an independent research service from the Financial Times, providing in-depth analysis of and statistical insight into China and south-east Asia. Our team of researchers in these key markets combine findings from our proprietary surveys with on-the-ground research to provide predictive analysis for investors.