Run on Thai Bank Linked to Rice Subsidy Points to Strain on Economy
Run on Thai Bank Linked to Rice Subsidy Points to Strain on Economy
Government Says Protests Will Cause Economy to Slow in Months to Come
WARANGKANA CHOMCHUEN and NOPPARAT CHAICHALEARMMONGKOL
Updated Feb. 17, 2014 12:03 p.m. ET
BANGKOK—Depositors have withdrawn nearly $1 billion from a bank linked to a foundering rice-subsidy program, the bank said Monday, in one of the first signs that Thailand’s months-old political stalemate is starting to affect the economy.
Adding to the pressure on Prime Minister Yingluck Shinawatra
, a government agency Monday forecast economic growth rates would slow in the months to come because of the unrest. The prime minister has faced street protests since November calling on her to resign.
Woravit Chailimpamontri, chief executive at Government Savings Bank, said that depositors withdrew 30 billion baht, or $930 million, over the past three days after the bank extended a 5 billion-baht loan to a financial cooperative involved in a state-subsidy program.
The cooperative, which buys rice from farmers at up to 50% above market prices, has been singled out by the antigovernment protesters as representative of the kind of damaging populist policies pursued by the prime minister to build rural support, which has translated into large parliamentary majorities.
As the withdrawals at Government Savings Bank worsened, Mr. Woravit said it wouldn’t extend any further loans to the Bank for Agriculture and Agricultural Cooperatives, which manages the rice subsidy program.
In recent weeks, the Yingluck administration has struggled to secure loans from commercial banks to pay the rice farmers, who are demanding payment for grain they already handed over to the government.
After dissolving parliament in December in a bid to ease tensions, Ms. Yingluck now governs in a caretaker capacity without any power to make major spending decisions. Protests and blockades of voting centers prevented Ms. Yingluck from forming a new government after national elections on Feb. 2, and a fresh round to complete the ballot isn’t set until April.
The political pressure on Ms. Yingluck continues despite government efforts to clear protesters from some sites in the capital. Protest leader Suthep Thaugsuban, a former deputy premier, on Monday urged his supporters to continue a blockade at the main government office in downtown Bangkok.
“Yingluck Shinawatra will not have a chance to return to work at the Government House, in this life or next,” Mr. Suthep said. His supporters set up concrete barriers in front of some of the gates and sealed them with cement in their latest bid to force Ms. Yingluck to step down.
Chalerm Yubamrung, chief of the government’s special security center, said the police will launch another operation to reclaim government buildings from the protesters on Tuesday.
Thailand’s economy has until recently largely withstood the turmoil that followed the military’s ouster of former leader Thaksin Shinawatra, the current prime minister’s brother, eight years ago.
While it has struggled, along with peers such as Malaysia and Indonesia, to regain the growth rates it saw in the 1980s and 1990s, Thailand largely has managed to continue attracting large amounts of foreign investment, especially in the automotive industry.
In the past few weeks, though, consumer confidence has sagged badly, clouding the longer-term outlook for Southeast Asia’s linchpin economy.
The National Economic and Social Development Board, a government agency, said Monday that the months of protests will limit growth in the first half of this year.
The board forecast growth in full-year GDP to tick back up to between 3% and 4%, as reviving Western demand boosts exports. The figure also assumed the tourism industry, which grew at a record 20% last year, will weather the political unrest.
The unrest has dented consumer confidence, though, and affected spending, according to the agency. Private consumption contracted 4.5% in the fourth quarter, a level not seen since the Asian financial crisis in 1997, according to Rahul Bajoria, a regional economist with Barclays.
“Overall, the domestic economy still remains a matter of big concern,” he said. “At this point, there is no end—it’s hard to say when the political uncertainty will disappear.”
Major investors such as Toyota Motor Corp. have warned that future investments could be jeopardized if the economic effect of the monthslong protests against the government and Ms. Yingluck worsen.
The board reported that the country’s gross domestic product expanded 0.6% on year in the fourth quarter compared with 2.7% growth in the third quarter, with the economy growing 2.9% in 2013 compared with 6.5% in 2012.
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