Despite recent political unrest, Thailand’s economy and ETF have managed to grow, albeit at a slower pace. The cost of the turmoil in this country highlights the risks for foreign investors when it comes to emerging markets.
Thailand has gone through an economic boom that decreased the poverty line from 42% to 8% in just three decades, but today’s more informed rural denizens of Thailand believe that the government only looks after the rich instead of the ordinary person, writes Andrew Higgins for The Boston Globe.
The weeks of protest was instigated by the peasant, rural-based movement that back Thaksin, the former Prime Minister, against an alliance of royalists, the military and the nation’s educated urban middle class, according to The China Post.
Among the economic costs of the fighting are:
- The conflicts may have trimmed GDP growth for the year from 7.5% to 6.5%, reports Nirmal Ghosh for The Straits Times. It’s a bit of a slowdown from the 12% growth the economy saw in the first quarter, but it’s closer to the typical growth of about 7% per year, which has been the case for the last four decades.
- One major area of concern is tourism, which has been hardest hit amid the turmoil. The industry makes up 6% of Thailand’s GDP. The depreciating euro may also diminish Thai exports to Europe, but only around 10% of total exports go to Europe.
- Some economists expect negative growth in the second quarter. The protests incurred $4.6 billion in damages and foreign investors have sold $2.04 billion in stocks between April 10 and the end of May.
Still, more optimistic, and risk-tolerant, foreign direct investors are still looking into Thailand, including Bridgestone tires and Ricoh’s printer and copiers. Despite the fighting, the Thailand ETF is up 7.6% in the last three months and 12.8% in the last six. It’s also managed to remain well above its long-term trend line.
- iShares MSCI Thailand Invest Mkt Index (THD)
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Max Chen contributed to this article.