Thailand’s gross domestic product (GDP) will shrink by 1 per cent if the current political crisis drags on, according to a top banker.

Boontuck Wangcharoen, chief executive officer of TMB Bank (formerly the Thai Military Bank), said the  ongoing rally by the anti-government United Front for Democracy Against Dictatorship (UDD) at the downtown Ratchaprasong intersection had little impact on its loan portfolio because the number of bank clients operating businesses in the area is rather small.

via GDP growth to drop by 1% if political crisis drags on, says banker.

Key risks to the outlook are (i) political uncertainty and (ii) the timing of the withdrawal of fiscal and monetary stimulus. Increased political tensions may have a long-lasting impact on investment, and withdrawal of stimulus (in Thailand and the advanced economies) must be precisely timed to avoid macroeconomic imbalances (including new asset bubbles) while also ensuring that the recovery is on a sufficiently solid footing.

Long-term growth will require improving productivity and greater focus on distributional issues. Imbalances present before the crisis remain, but the crisis has increased the urgency of reforms to improve productivity, enhance competitiveness, and promote more equitable growth. Openness to trade and investment have been – and will continue to be – essential to Thailand’s long-term growth. However, a return to high growth will require boosting domestic consumption and developing additional sources of external demand.