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Thailand's long descent into economic darkness

K-shaped trajectory shows the generals lack a battle plan

| Thailand
Prayuth Chan-O-Cha forgot to guard Thailand's left flank.   © Sipa/AP

William Pesek is an award-winning Tokyo-based journalist and author of "Japanization: What the World Can Learn from Japan's Lost Decades."

As the globe sees flickers of light at the end of the pandemic-era tunnel, the view from Bangkok looks rather dark.

Much of the Asia-Pacific region is gearing up for a 2022 reopening and recovery cycle. Southeast Asia's No. 2 economy is on a 2023 track. This timeline does not come from overseas naysayers but Bank of Thailand Gov. Sethaput Suthiwartnarueput, who sees more data than the rest of us.

Yet Thailand's strategy to, in Sethaput's words, "get back to pre-COVID-19 levels" faces a triple whammy sure to do longer-lasting damage no matter what the gross domestic product readings are by 2023: a devastated tourism sector, a sputtering consumption engine and excessive household debt.

Bad things come in threes, as they say. And Thailand is suffering through COVID infection wave No. 3, creating new headwinds that the BOT seems ill-equipped to combat.

As sober as Sethaput's assessment sounds, indications emanating from his staff are even worse. Case in point: senior BOT director Don Nakornthab arguing the nation may be looking at a bumpy K-shaped recovery. The reason: even if exports recover, tourism might not anytime soon.

A tour boat operator waits for a customer at a beach in Phuket on Apr. 21: even if exports recover, tourism might not anytime soon.   © Getty Images

K-shaped recoveries are essentially dual-track exits from crises, where the upper middle class and wealthy see fortunes go up and most of society sees them fall. Whereas China is producing something of a V-shaped revival, many developed economies, including the U.S., are sure to emerge even less equal income-wise than back in 2019.

Thailand's troubles are deeper, though, considering the place was in semi-crisis mode before COVID. The problem, in a nutshell, is that the military government that grabbed power in 2014 has been making it up as it goes along. That left Thailand on a uniquely fragile footing as the pandemic hit Asia.

In many ways, this was business as usual over the previous 15 years or so. After the 1997-1998 Asian financial crisis, Bangkok saw a truly bewildering number of new governments take power, promise change and fail miserably.

The most notable of those was Thaksin Shinawatra, who took power in 2001 pledging to reimagine the system and eradicate graft to spread the benefits of growth. Instead, he remade the economy to serve his family businesses, Silvio Berlusconi-style.

By 2006, the military had had enough and grabbed power. After that, Bangkok's political revolving door spat out a number of governments, including one headed by Thaksin's baby sister, Yingluck Shinawatra. All the while, billionaire Thaksin rallied his voters from exile, like some Southeast Asian Donald Trump.

In 2014, a new band of generals effectively said "hold my Singha" and grabbed the premiership. Their leader, Prayuth Chan-ocha, still holds the reins as Thailand's most severe COVID-19 outbreak shakes up the political scene anew.

Prayuth started out projecting a bold get-big-things-done persona. Yet since swapping the uniform for a business suit, he has run a deer-in-the-headlights operation.

For a man who claimed to despise Thaksinomics, Prayuth has proved adept at emulating its core tenets. He, too, throws cash handouts at rural Thais to create a bulwark against urban elites. Generally speaking, the city folk know Prayuth has done next to nothing to increase Thai competitiveness or innovation.

Prayuth failed to fix Thailand's myriad leaks when the economic sun was shining from 2014 to early 2020. He did not do the hard work of eliminating red tape, investing in education and productivity increases or keeping pace with reform efforts in Indonesia, Vietnam and elsewhere. Nor has he addressed a China threat that was obvious in Thaksin's day.

Rather than whip the local workforce into shape, Prayuth did what every Thai leader has since the mid-1990s: bet it all on bringing in more foreign tourists, selling more goods abroad and attracting more foreign capital to support household consumption. But Prayuth forgot to guard Thailand's left flank: a pandemic threatening all three economic forces.

The household debt problem means Prayuth's economic troops -- Thailand's 70 million people -- are tired and weighed down just as a new battle begins. Thai consumers are among Asia's most burdened, with an average household debt-to-GDP ratio of 89.3%, the highest since the BOT began measuring it in 2003. That is up from 78.1% in 2017.

It means that households are really struggling as the new COVID wave hits incomes and confidence. It means, too, that any fresh stimulus Bangkok is tossing into the mix is purely defensive. The nearly $100 billion budget lawmakers just passed might limit fallout, but does zero to put Thailand on a brighter path come 2023 and beyond.

Now the pandemic is throwing Thailand even more off course. The destination is higher-middle-income status -- per capita income well above $10,000. Thailand entered the pandemic below the $8,000 threshold. By 2023, who knows? Considering that consumption accounts for half of Thailand's $502 billion GDP, the nation is poised to move backward.

Thailand's political dysfunction these last 15 to 20 years was already consigning the place to a lost decade before the pandemic. Now one of Asia's most promising economies may face something worse because its leaders are stuck in time.

We can debate whether Bangkok is trapped in 1997, 2006 or 2014. It is painfully clear, though, that Thailand will not be in a great place once the COVID era passes.

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