Thailand: Another coup challenges the country's economic resilience

Thailand's economy is facing a triple threat: political instability, deterioration in financing conditions and a slowdown in domestic demand. Tapering by the US FED and political turmoil accelerated short-term capital outflows while long-term capital flows remained resilient. As a result, sectors led by domestic demand and domestic financing will be the most affected: construction, retail and, to a lesser extent, textiles. Other key sectors, such as IT and automotive manufacturing, should however benefit from the external demand momentum and funding from external sources. Our baseline crisis resolution' scenario (70% of likelihood) supports a recovery in H2 (GDP expected at +1.5% only in 2014) led by rising external demand. Should the situation escalate (scenario 2, 30% of likelihood), GDP could contract by -2% and supply chains at risk include automotive and IT ones with spillovers in China, Japan and the US.