Thailand's economy was recovering well from the global financial crisis in the first quarter of this year – as GDP data on Monday is likely to show – but violent protests since April have already started to take a toll. The “red shirt” anti-government protests were finally broken up by the military on Wednesday, sparking an orgy of violence that all but destroyed the country's biggest shopping mall and closed down banks for two days. The full extent of the damage is still being worked out, but below are details so far available of the impact on companies, tourism and the $264 billion economy, dependent on exports of manufactured goods but also the world's biggest shipper of rice and rubber. What's the likely economic impact? Economists expect Monday's data to show the economy grew 1.8 percent in the first three months of 2010 from the previous quarter, but Finance Minister Korn Chatikavanij told Reuters on Friday he would be “very surprised” if the economy managed to grow at all in the April-June quarter. He estimated the unrest had already cut 0.3 to 0.5 point off growth this year. He had been looking for 4.5 to 5.0 percent. Economist Pimonwan Mahujchariyawong at Kasikorn Research Center expected a sharp contraction in the second quarter. “We forecast that the Thai economy in 2010 will expand by 2.6-4.5 percent, with our base scenario 3.9 percent. At this stage, we think that our lower 2.6 percent pace can be held even in the event that political tension is prolonged.” Economist Penn Nee Chow at United Overseas Bank said the hit would come through the services sector, since most of the big manufacturing plants are outside Bangkok. As for the impact on full-year growth: “I haven't put any number to it yet. My forecast was already pretty low to begin with at 4.3 percent.” Sethaput Suthiwart-Narueput, chief economist at Siam Commercial Bank, noted export growth would remain strong in the second quarter but said it was hard at this stage to assess the impact elsewhere, with many people's income dependent on tourism. “Initially, we forecast GDP growth of 4.5-5.5 percent but we're in the process of revising it down ... Average GDP for the entire year should still grow over 4 percent.” What about tourism? Tourism accounts for 6 percent of gross domestic product and employs at least 15 percent of the workforce. Last year, also marred by political violence, 14.1 million tourists arrived. The state Tourism Authority of Thailand has cut its target for arrivals this year to 13 million from 15.5 million and slashed its revenue target by a fifth to 480 billion baht ($14.8 billion). The Tourism Council of Thailand, a private sector body, has also cut its target of arrivals to 13 million from 16 million. Official arrival statistics for April and May are not available but data from Airports of Thailand give some guide. The number of passengers using Bangkok's main Suvarnabhumi airport from May 1-18 dropped 7.8 percent from a year earlier to 1.62 million, before plunging on May 19, when the military moved in to end the protest in the early hours. On May 19 and 20 passengers dropped by around half from a year earlier to 50,000 and 62,000 respectively. Occupancy rates in the budget hotels in the Khao San Road area popular with backpackers have plummeted from a normal 80 percent to, at best, 10 percent. At the other end of the price scale, the 420-room Sheraton Grande Sukhumvit Hotel has seen its occupancy fall to 30 percent from 80 percent earlier in the year. What is the cost to business? The biggest loss has probably been suffered by Central Pattana PCL, whose Central World shopping mall – the second-biggest in Southeast Asia – was set on fire by arsonists as the troops closed in on the protesters on Wednesday. The operator said it might be able to get shoppers back into one part of the building within six months, but the front section housing the trendy ZEN store was destroyed. The company says it had general insurance of $400 million plus another $100 million cover for riot and terrorism, but it says rebuilding and renovation should cost under $310 million. Central World was in the heart of the Rachaprasong area where the “red shirts” set up camp from April 3, closing several malls from that date. Luxury hotels in the area also gradually closed and there is no word when they will re-open. The various malls in the area had combined revenue of around 5.2 billion baht ($161 million) in a normal month, said Fafuen Temboonkiat of the Rachaprasong Square Trade Association. At least a dozen bank branches were burnt during the riots and the central bank told the banks to close on Thursday and Friday for security reasons. The banks are still assessing the cost. The second-largest, Krung Thai Bank, has said both profit and loan growth would be hit by the unrest from April. It had planned to raise its 2010 loan growth target to “double digits” from 7 percent after a strong first quarter but that is now under review.
